Chapters 6-10 - Chapter 6 True/False Questions 1. Treasury...

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Chapter 6 True/False Questions 1. Treasury notes have original maturities from 1 to 10 years and Treasury bonds have original maturities of 10 years or more. Answer: True Page: 153 Level: Easy 2. A callable bond is one where the issuer is required to retire a certain amount of the outstanding bonds each year to ensure that all the bond principle is paid by final maturity. Answer: False Page: 173 Level: Easy 3. Of the three major sectors of bond issuers, corporations have the greatest dollar value of bonds outstanding. Answer: True Page: 152 Level: Medium 4. “On the run” Treasury notes and bonds are newly issued securities and “off the run” Treasuries are securities that have been previously issued. Answer: True Page: 152 Level: Easy 5. Bonds that give the bondholder the opportunity to purchase common stock at a prespecified price up to a specified date are called convertible bonds. Answer: False Page: 171-172 Level: Medium 6. The dirty price plus accrued interest is called the clean price of the security. Answer: False Page: 159 Level: Easy 7. Accrued interest owed to the bond seller increases as the next coupon payment date approaches Answer: True Page: 159 Level: Medium Saunders, Financial Markets and Institutions , 2/e 57
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Chapter 6 Bond Markets 8. Revenue bonds are backed by the full revenue of the municipality. Answer: False Page: 166 Level: Easy 9. Tax exempt bonds pay lower interest rates than taxable bonds because of their tax advantage. Answer: True Page: 168 Level: Medium 10. An unsecured bond that has no specific collateral other than the general creditworthiness of the issuing firm is called a debenture. Answer: True Page: 171 Level: Easy 11. Municipalities are liable for repayment of industrial development bonds in the event the corporation cannot repay. Answer: False Page: 166 Level: Medium 12. Bond ratings use a classification system to give investors an idea of the amount of default risk associated with the bond issue. Answer: True Page: 175 Level: Easy 13. Bonds rated below Baa by Moody's or BBB by S&P are junk bonds. Answer: True Page: 177 Level: Medium 14. Euro bonds are bonds denominated in the issuer's home currency, but are issued outside their home country. Answer: True Page: 182 Level: Medium 15. Dollar denominated bonds issued in the U.K. are called Bulldog bonds. Answer: False Page: 183 Level: Medium Multiple Choice Questions Saunders, Financial Markets and Institutions , 2/e 58
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16. The largest component of the U.S. National Debt is A) T-Bills B) T-Bonds C) State and local government securities D) U.S. Savings Bonds E) None of the above Answer: E Page: 153 Level: Medium 17. A T-Bond with a $1000 par is quoted at 98:20 Bid, 98:24 Ask. The clean price for you to buy this bond is A) $986.25 B) $987.50 C) $982.00 D) $982.40 E) None of the above Answer: B Page: 159-160 Level: Medium 18. The quoted ask yield on a 15 year $1000 par T-Bond with a 6% semiannual payment coupon and a price quote of 104:12 is A) 6.00% B) 5.60%
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Chapters 6-10 - Chapter 6 True/False Questions 1. Treasury...

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