PM Bonds 1

Bond ratings are positively related to

• Leverage.

• Size.

• Type of business.

• All of the above.

The bond market segments that tend to be highly correlated and move together include

• Short and long term bonds.

• Short and intermediate term bonds.

• Intermediate and long term bonds.

• Short, intermediate and long term bonds.

Of the following provisions that might be found in a bond indenture, which would tend to reduce the coupon interest rate?

• A call provision

• No restrictive covenants

• Change in bond rating from Aaa to Aa

• A sinking fund provision

The refunding provision of an indenture allows bonds to be retired unless

• They are replaced with a lower coupon bond issue.

• The remaining time to maturity is less than five years.

• The remaining time to maturity is greater than five years.

• The stated time period in the indenture has not passed.

Serial bonds

• Can be callable.

• Can have sinking funds.

• Have different maturity dates.

• All of the above.

Which of the following statements is not true regarding bond ratings?

• The ratings assigned are meant to indicate the probability of default for the bond issuer.

• The bonds assigned one of the top four rating classes are considered investment grade bonds.

• Once a rating is assigned to an issue it cannot be changed for the first two years after which it is reviewed on a regular basis.

• Bonds rated BB and below are referred to as high yield or "junk" bonds.

The bonds issued by the Bank of England are known as

• Gilts.

• Bunds.

• Limies.

• Treasuries.

When a bond issue is secured by a legal claim on equipment it is known as a(n)

• Junior bond.Income bond.

• Income bond.

• Bearer bond.

• Trust certificate.

Which set of conditions will result in a bond with the greatest volatility?

• A high coupon and a short maturity

• A high coupon and a long maturity

• A low coupon and a short maturity

• A low coupon and a long maturity

The annual interest paid on a bond relative to its prevailing market price is called its

• Yield to maturity.

• Coupon rate.

• Effective yield.

• Current yield.