FIN003_BSA2_Final Exam_Part I

Long-term bonds are ... than short-term bonds.

• more liquid

• less risky

• less sensitive to interest rate changes

• subject to more uncertainty

If a bond's yield to maturity is lower than its coupon rate, the bond will sell at a discount.

• True

• False

As a bond approaches its maturity date, its price necessarily approaches par value.

• True

• False

Which of the following statements is FALSE regarding bonds?

• If the par value is lower than the market price, then the yield-to-maturity must be lower than the coupon rate.

• If the market price is lower than the par value, then the coupon rate must be lower than the yield-to-maturity.

• Both A and B are false.

• None of the above are false.

When the price of bond is calculated below its par value, it is classified as...

• classified bond

• discount bond

• compound bond

• consideration earnings

What is a bond?

• an agreement or friendship

• binding security

• something that binds, fastens, confines, or holds together

• a type of debt a company issues to investors

When you purchase a municipal bond, you are:

• buying a portion of a municipality

• diversifying your portfolio

• investing in an index fund

• loaning money to a municipality

A bond issued by a corporation is called a ________ .

• corporate bond

• market share

• stock option

• share of stock

The rate of interest on a bond is called the ________ .

• bond rate

• coupon rate

• discount rate

• interest rate

A bond which has a yield to maturity greater than its coupon rate will sell for a price

• below par

• at par

• above par

• equal to face value of bond plus the interest payments