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: A) Coupon. B) Face value. C) Maturity. D) Yield to maturity. E) Coupon rate. Answer: B Topic: MATURITY 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. Answer: C Topic: YIELD TO MATURITY 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. Answer: D

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Topic: COUPON RATE 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. A) par B) discount C) premium D) zero coupon E) floating rate Answer: A 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: A) Par bond. B) Discount bond. C) Premium bond. D) Zero coupon bond. E) Floating rate bond. Answer: B 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: A) Par bond. B) Discount bond. C) Premium bond. D) Zero coupon bond. E) Floating rate bond. Answer: C 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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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: A) Indenture. B) Covenant. C) Terms of trade. D) Form 5140. E) Call provision. Answer: A 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: A) New-issue form. B) Registered form. C) Bearer form. D) Debenture form. E) Collateral form. Answer: B Topic: BEARER BONDS 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: A) New-issue form. B)

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## This note was uploaded on 05/10/2011 for the course FIN 3716 taught by Professor Fang during the Spring '10 term at LSU.

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

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