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Chapter06-InterestRatesandBondValuation6-1Chapter06InterestRatesandBondValuationMultipleChoiceQuestions1.Whenyourefertoabond'scoupon,youarereferringtowhichoneofthefollowing?A.DifferencebetweenthepurchasepriceandthefacevalueB.AnnualinterestdividedbythecurrentbondpriceC.DifferencebetweenthebidandaskpriceD.AnnualinterestpaymentE.Principalamountofthebond2.Whatistheprincipalamountofabondthatisrepaidattheendoftheloantermcalled?A.CouponB.MarketpriceC.AccruedpriceD.DirtypriceE.Facevalue3.Theannualinterestdividedbythefacevalueofabondisreferredtoasthe:A.marketrate.B.callrate.C.couponrate.D.currentyield.E.yield-to-maturity.4.Onwhichoneofthefollowingdatesistheprincipalamountofabondrepaid?A.CoupondateB.IssuedateC.DiscountdateD.MaturitydateE.FacedateChapter06-InterestRatesandBondValuation6-25.Whichoneofthefollowingtermsreferstoabond'srateofreturnthatisrequiredbythemarketplace?A.CouponrateB.YieldtomaturityC.DirtyyieldD.CallyieldE.Discountrate6.Thecurrentyieldonabondisequaltotheannualinterestdividedbywhichoneofthefollowing?A.IssuepriceB.MaturityvalueC.FaceamountD.CurrentmarketpriceE.Currentparvalue7.Thewrittenagreementthatcontainsthespecificdetailsrelatedtoabondissueiscalledthebond:A.indenture.B.debenture.C.document.D.registrationstatement.E.issuepaper.8.Aregisteredformbondisdefinedasabondthat:A.isabearerbond.B.isheldinstreetname.C.payscouponpaymentsdirectlytotheownerofrecord.D.islistedwiththeSecuritiesExchangeCommission(SEC).E.isunsecured.Chapter06-InterestRatesandBondValuation6-39.Thismorning,Jefffoundabondcertificatelyingonthefloorofabank.Hepickeditupandnoticedthatthebondmaturedtoday.Hepresentedthebondtothebanktellerandreceivedboththeprincipalandinterestpayment.ThebondthatJefffoundmusthavebeenwhichoneofthefollowing?A.DebentureB.NoteC.RegisteredformbondD.BearerformbondE.Callablebond10.MillerFarmProductsisissuinga15-year,unsecuredbond.Basedonthisinformation,youknowthatthisdebtcanbedescribedasa:A.note.B.bearerformbond.C.debenture.D.registeredformbond.E.callprotectedbond.11.Anoteis:A.unsecureddebtthatisgenerallypayablewithinthenexttenyears.B.aformaltypeofloanthatissecuredbyrealestate.C.long-termdebtsecuredbypart,orall,oftheassetsoftheborrower.D.debtthatissecuredbyaborrower'saccountsreceivables.E.thewrittenagreementwhichdetailstheinformationrelativetoabondissue.12.Whattermisusedtodescribeanaccountthatabondtrusteemanagesforthesolepurposeofredeemingbondsearly?A.RegisteredaccountB.BeareraccountC.CallaccountD.SinkingfundE.PremiumfundChapter06-InterestRatesandBondValuation6-413.Acallprovisiongrantsthebondissuerthe:A.righttocontacteachbondholdertodetermineifheorshewouldliketoextendthetermofhisorherbonds.B.optiontoexchangethebondsforequitysecurities.C.righttoautomaticallyextendthebond'smaturitydate.D.righttorepurchasethebondsontheopenmarketpriortomaturity.E.optionofrepurchasingthebondspriortomaturityatapre-specifiedprice.14.Thecallpremiumistheamountbywhichthe:A.marketpriceexceedstheparvalue.B.marketpriceexceedsthecallprice.C.facevalueexceedsthemarketprice.D.callpriceexceedstheparvalue.E.callpriceexceedsthemarketprice.15.Dexter,Inc.hasabondissueoutstanding.Theissue'sindentureprovisionprohibitsthefirmfromredeemingthebondsduringthefirstthreeyears.Thisprovisionisreferredtoasthe_____provision.A.safeguardB.marketC.liquidityD.deferredcallE.sinkingfund16.Travisrecentlypurchasedacallablebond.However,thatbondcannotbecurrentlyredeemedbytheissuer.Thus,thebondmustcurrentlybe:A.subjecttoasinkingfundprovision.B.adebenture.C.afallenangel.D.callprotected.E.unrated.Chapter06-InterestRatesandBondValuation6-517.Aprotectivecovenant:A.protectstheborrowerfromunscrupulouspracticesbythelender.B.isdesignedtoprotectthebonddealerfrompotentiallegalliabilityrelatedtothebondissue.C.preventsabondfrombeingcalled.D.limitstheactionsoftheborrower.E.guaranteesthatabondwillberepaidinfullwithinterest.18.Manning,Inc.originallyissuedbondsthatwereratedinvestmentgrade.Thesebondshavenowbeendowngradedtojunkstatus.Whichoneofthefollowingtermsappliestothissituation?A.CalledbondB.ConvertedbondC.ProtectedcovenantD.FallenangelE.Floatingbond19.Whichoneofthefollowingtermsappliestoabondthatinitiallysellsatadeepdiscountandpaysnointerestpayments?A.CallableB.IncomeC.ZerocouponD.ConvertibleE.Tax-free20.Thepriceatwhichadealerwillpurchaseabondiscalledthe_____price.A.askedB.faceC.callD.putE.bidChapter06-InterestRatesandBondValuation6-621.Thepriceatwhichaninvestorcanpurchaseabondfromadealeriscalledthe_____price.A.askedB.couponC.callD.faceE.bid22.Abondtraderjustpurchasedandresoldabond.Theamountofprofitearnedbythetraderfromthispurchaseandresaleisreferredtoasthe:A.marketyield.B.yield-to-call.C.bid-askspread.D.currentyield.E.bondpremium.23.Whichoneofthefollowingisthequotedpriceofabond?A.ParvalueB.DiscountpriceC.FacevalueD.DirtypriceE.Cleanprice24.Whichoneofthefollowingisthepricethataninvestorpaystopurchaseanoutstandingbond?A.DirtypriceB.FacevalueC.CallpriceD.BidpriceE.CleanpriceChapter06-InterestRatesandBondValuation6-725.Arealrateofreturnisdefinedasaratethathasbeenadjustedforwhichoneofthefollowi