Chapter 7 Test Bank

Chapter 7 Test Bank - CHAPTER 6 Interest Rates and Bond...

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CHAPTER 6 Interest Rates and Bond Valuation I. DEFINITIONS Topic: COUPON 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. Answer: A Topic: FACE VALUE 2. The principal amount of a bond that is repaid at the end of the loan term is called the bond's: Topic: MATURITY 3. The specified date on which the principal amount of a bond is repaid is called the bond's: Topic: YIELD TO MATURITY 4. The rate of return required by investors in the market for owning a bond is called the:
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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. Answer: E Topic: PAR BONDS 6. A bond with a face value of $1,000 that sells for $1,000 in the market is called a _________ bond. Topic: DISCOUNT BONDS 7. A bond with a face value of $1,000 that sells for less than $1,000 in the market is called a: Topic: PREMIUM BONDS 8. A bond with a face value of $1,000 that sells for more than $1,000 in the market is called a: Topic: UNFUNDED DEBT 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 (i.e., collateralized borrowings).
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Answer: D
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Topic: INDENTURE 10. The written, legally binding agreement between the corporate borrower and the lender detailing the terms of a bond issue is called the: Topic: REGISTERED BONDS 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: Topic: BEARER BONDS
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