Chapter 18 Review

Bonds often appreciate in value, especially when interest rates are dropping.

• True
• False

A convertible bond can be exchanged for a certain number of shares of common (a)   .

Investment-grade bonds have higher yields than junk bonds.

• True
• False

One main difference between stocks and bonds is that

• bonds are shares of ownership in a corporation, not loans
• unlike stock dividends, a bond’s interest does not go up and down
• bonds represent equity, not debt
• corporations are required to pay dividends on stocks but not bonds

Bonds​ are loans that a corporation or government body must repay at __________, with interest.

• default
• zero-coupon
• debenture
• face value

The amount a bondholder will be paid at maturity is called

• dividend
• yield
• face value
• market value

Corporations usually agree not to call bonds for the first ___ years after issuance.

• 5
• 10
• 20
• 7

A type of corporate bond based on the general creditworthiness of the company is called a(n)

• secured bond
• mortgage bond
• annuity
• debenture

When bonds sell for more than their face value, they are selling at a

• cut rate
• discount
• premium
• capital gain

When bonds sell for less than their face value, they are selling at a

• cut rate
• discount
• premium
• capital gain