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CHAPTER 7 - CHAPTER 7 Interest Rates and Bond Valuation I....

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CHAPTER 7 - CHAPTER 7 Interest Rates and Bond Valuation I....

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CHAPTER 7 Interest Rates and Bond Valuation I. DEFINITIONS COUPON a 1. The stated interest payment, in dollars, made on a bond each period is called the bond’s: a. coupon. b. face value. c. maturity. d. yield to maturity. e. coupon rate. FACE VALUE b 2. The principal amount of a bond that is repaid at the end of the loan term is called the bond’s: a. coupon. b. face value. c. maturity. d. yield to maturity. e. coupon rate.
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MATURITY c 3. The specified date on which the principal amount of a bond is repaid is called the bond’s: a. coupon. b. face value. c. maturity. d. yield to maturity. e. coupon rate. YIELD TO MATURITY d 4. The rate of return required by investors in the market for owning a bond is called the: a. coupon. b. face value. c. maturity. d. yield to maturity. e. coupon rate. COUPON RATE e 5. The annual coupon of a bond divided by its face value is called the bond’s: a. coupon. b. face value. c. maturity. d. yield to maturity. e. coupon rate.
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PAR BONDS a 6. A bond with a face value of $1,000 that sells for $1,000 in the market is called a _____ bond. a. par value b. discount c. premium d. zero coupon e. floating rate DISCOUNT BONDS b 7. A bond with a face value of $1,000 that sells for less than $1,000 in the market is called a _____ bond. a. par b. discount c. premium d. zero coupon e. floating rate PREMIUM BONDS c 8. A bond with a face value of $1,000 that sells for more than $1,000 in the market is called a _____ bond. a. par
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b. discount c. premium d. zero coupon e. floating rate UNFUNDED DEBT d 9. The unfunded debt of a firm is generally understood to mean the firm’s: a. preferred stock. b. debts that mature in more than one year. c. debentures. d. debts that mature in less than one year. e. secured debt. INDENTURE a 10. The written, legally binding agreement between the corporate borrower and the lender detailing the terms of a bond issue is called the: a. indenture. b. covenant. c. terms of trade. d. form 5140. e. call provision.
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REGISTERED BONDS b 11. The form of bond issue in which the registrar of the company records ownership of each bond, with relevant payments made directly to the owner of record, is called the _____ form. a. new-issue b. registered c. bearer d. debenture e. collateral BEARER BONDS c 12. The form of bond issue in which the bond is issued without record of the owner’s name, with relevant payments made directly to whoever physically holds the bond, is called the _____ form. a. new-issue b. registered c. bearer d. debenture e. collateral DEBENTURES e 13. The unsecured debts of a firm with maturities greater than 10 years are most literally called: a. unfunded liabilities. b. sinking funds. c. bonds.
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d. notes. e.
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