test 5

Question 1

Q1: A bond is issued at par value when:

A. The bond pays no interest.
B. The bond is not between interest payment dates.
C. Straight line amortization is used by the company.
D. The market rate of interest is the same as the contract rate of interest.
E. The bond is callable.

Question 2

2. When a bond sells at a premium:

A. The contract rate is above the market rate.
B. The contract rate is equal to the market rate.
C. The contract rate is below the market rate.
D. It means that the bond is a zero-coupon bond.
E. The bond pays no interest.

Question 3

3. A bond sells at a discount when the:

A. Contract rate is above the market rate.
B. Contract rate is equal to the market rate.
C. Contract rate is below the market rate.
D. Bond has a short-term life.
E. Bond pays interest only once a year.

Question 5

The legal contract between the bond issuer and the bondholders is called

A. Debenture.
B. Bond indenture.
C. Mortgage.
D. Installment note.
E. Term bond.