1.
If a bond sells for its par value, the coupon interest rate and yield to maturity are equal.
Answer:
True;
Difficulty:
1;
Keywords:
Par Value, Coupon Rate, Yield to Maturity
2.
Subordinated debentures are more risky than unsubordinated debentures because the claims
of subordinated debenture holders are less likely to be honored in the event of liquidation.
Answer:
True;
Difficulty:
1;
Keywords:
Subordinated Debentures, Unsubordinated
Debentures, Liquidation
3.
An example of a Eurobond is a bond issued in Asia by a U.S. Corporation with interest and
principal payments made in U.S. dollars.
Answer:
True;
Difficulty:
1;
Keywords:
Eurobond
4.
There are no cash flow effects for the issuer of a zero coupon bond except for the initial
cash inflow when the bonds are issued and the cash payment when the bonds mature.
Answer:
False;
Difficulty:
2;
Keywords:
Zero Coupon Bond, Amortization of Discount
5.
Junk bonds are also called high-yield bonds.
Answer:
True;
Difficulty:
1;
Keywords:
Junk Bonds, High-yield Bonds
6.
The expected yield on junk bonds is lower than the yield on AAA-rated bonds because of
the higher default risk associated with junk bonds.
Answer:
False;
Difficulty:
1;
Keywords:
Junk Bonds, Default Risk, Bond Yields
8.
A bond with a par value of $1,000 is listed in the Wall Street Journal at a price of 100.50.
This bond is selling for $1,005.
Answer:
True;
Difficulty:
1;
Keywords:
Bond Quotation, Par Value
9.
A bond with a coupon rate of 8% will also have a yield to maturity of 8%.
Answer:
False;
Difficulty:
1;
Keywords:
Yield to Maturity, Coupon Rate
14.
If a bond is selling below its face value, then its yield to maturity must be less than the
bond’s coupon rate.
Answer:
False;
Difficulty:
1;
Keywords:
Yield to Maturity, Face Value, Coupon Rate
15.
If two bonds have the same yield to maturity, they also have the same current yield.
Answer:
False;
Difficulty:
1;
Keywords:
Yield to Maturity, Current Yield
16.
Bonds generally have a maturity date while preferred stocks do not.
Answer:
True;
Difficulty:
1;
Keywords:
Bonds, Maturity Date, Preferred Stock
17.
Bond prices are inversely related to market interest rates.
Answer:
True;
Difficulty:
1;
Keywords:
Bond Prices, Interest Rates
18.
The restrictive provisions contained in the bond indenture protect the common
stockholders.
Answer:
False;
Difficulty:
1;
Keywords:
Restrictive Provisions, Bond Indenture
27.
As market rates of interest rise, investors move their funds into bonds, thus increasing their
price and lowering their yield.
Answer:
False;
Difficulty:
1;
Bond Value, Interest Rates
28.
A mortgage bond is secured by a lien on real property.
Answer:
True;
Difficulty:
1;
Keywords:
Mortgage Bond