Chapter 2, Bonds

Question 1

bond sold for less than Par value

Answer 1

discount

Question 2

Bond sold for more than par value

Answer 2

premium

Question 3

Lot of bonds that mature at the same time

Answer 3

Term bond issue

Question 4

Lot of bonds that mature at various times

Answer 4

Serial bond issue

Question 5

Bonds that pay interest at the maturity date and not before.

Answer 5

Zero coupon bonds

Question 6

Bond used for lump sum of money needed at future date?

Answer 6

Zero coupon bond

Question 7

Fund used to pay off / buy back bonds

Answer 7

Sinking fund

Question 8

The bonds coupon rate is its?

Answer 8

Nominal yield

Question 9

Measure of the annual interest the investor receives compared to its current market price?

Answer 9

Current yield = Annual interest/Market Price (10% / $800)

Question 10

The highest yield for discount bonds?

Answer 10

Yield to maturity then current yield then nominal yield

Question 11

The highest yield for premium bonds?

Answer 11

Nominal yield then current yield then yield to maturity.

Question 12

Unsecured bonds with junior claim on assets issued after other unsecured bonds are?

Answer 12

subordinate debentures

Question 13

Treasury …….s mature in 2 to 10 years

Answer 13

Notes

Question 14

Treasury …….s can take upto 30 years to mature

Answer 14

Bonds

Question 15

Treasury ……s mature in less than one year

Answer 15

Bills (T-bills)

Question 16

Zero coupon bonds issued by the US government

Answer 16

STRIPS

Question 17

Taxation of Treasuries?

Answer 17

Subject to federal taxes but not state and local

Question 18

Nonmarketable bonds are?

Answer 18

Savings bonds

Question 19

Only government backed Mortgage security

Answer 19

GNMA - Ginnie May

Question 20

Tax equivalent yield on a muni is?

Answer 20

Municipal yield / (100%-Tax bracket) so …(9% / 100-28)

Question 21

Net yield of taxable corporate bond

Answer 21

Taxable yield X (100% - Tax bracket)