Question 1
1. Bob expects to retire in a few years and his primary goal is to avoid major losses in his 401-K account. Which of the following bond characteristics should he be seeking?
I and III only.
I, III and III only.
II and IV only.
II, III and IV only.
4.5 points
Question 2
1. Foreign companies sometimes issue bonds which pay interest and principal in U. S. dollars.
True
False
4.5 points
Question 3
1. Which of the following statements concerning mortgage backed securities are correct?
I and III only
I and IV only
II, III and IV only
I, II and IV only
4.5 points
Question 4
1. During the period 2008 through 2012, bonds performed poorly because of falling interest rates.
True
False
4.5 points
Question 5
1. The bond market is considered bearish when
market interest rates are low or falling.
market interest rates are high or rising.
the risk-free rate of return exceeds the required rate of return.
more bonds are called than issued over a given period of time.
4.5 points
Question 6
1. What is the coupon rate of an annual bond that has a yield to maturity of 8.5%, a current price of $942.32, a par value of $1,000 and matures in thirteen years?
7.67%
7.75%
8.33%
8.50%
4.5 points
Question 7
1. A $1,000 par value, 12-year annual bond carries a coupon rate of 7%. If the current yield of this bond is 7.995%, its market price to the nearest dollar is
$876.
$925.
$1,075.
$1,125.
4.5 points
Question 8
1. A downward sloping yield curve (short-term rates are higher than long-term rates) often precedes a recession.
True
False
4.5 points
Question 9
1. The conversion ratio denotes the number of shares for which a convertible bond can be exchanged.
True
False
4.5 points
Question 10
1. The risk-free rate of return is equal to the
real rate plus a risk premium.
required return minus the inflation premium.
real rate plus the inflation premium.
required return minus the real rate.
