Debt Fundamentals

Question 1

A balloon maturity could refer to

Answer 1

A serial bond issue that has one maturity which contains a disproportionately large amount of the principal

Question 2

How is a basis point shown as a percentage?

Answer 2

.01%

Question 3

A bond with a 4% coupon rate and a par value of $1000 that pays interest semiannually will pay ___ to an investor each year

Answer 3

$40

Question 4

A bond’s yield moves from 5.00% to 6.00%. The yield has increased by

Answer 4

100 basis points

Question 5

Municipal term bonds are generally quoted on a

Answer 5

dollar price basis

Question 6

Zero coupon bonds

Answer 6

do NOT pay interest

Question 7

A group of bonds created and sold at the same time by the same entity is called a

Answer 7

bond issue

Question 8

Term corporate bonds are quoted on a

Answer 8

Percentage of par basis

Question 9

150 basis points are equal to

Answer 9

$15.00 per $1,000
1.5%

Question 10

A bond issue where the bonds have the same maturity but different dates of issuance is a

Answer 10

series bond offering

Question 11

Which security is NOT subject to reinvestment risk?

Answer 11

zero coupon bonds

Question 12

John has a portfolio of corporate bonds. If interest rates drop how will his portfolio be affected?

Answer 12

Its value will increase