Bond Investment Quiz

What is a bond in financial terms?

• A type of stock

• An IOU

• A certificate of deposit

• A mutual fund

When you purchase a bond, what are you essentially doing?

• Buying a share of a company

• Lending money to a company or government

• Exchanging currencies

• Investing in a private venture

What do you receive from a bond investment?

• Dividends

• Principal plus interest

• Ownership in the company

• A fixed number of company products

Considering a $1000 bond with a 10% interest rate over 10 years, how much will you get paid annually?

• $10

• $100

• $1000

• $10,000

At the end of the term for a $1000 bond with a 10% interest rate over 10 years, what is the total amount you get back?

• $100

• $1000

• $1100

• $2000

What does the coupon component of a bond represent?

• The total amount of the bond

• The interest paid on the bond

• The life or term of the bond

• The original price of the bond

What is the maturity of a bond?

• The interest rate of the bond

• The original price of the bond

• The life, length, or term of the bond

• The total amount of interest paid over the life of the bond

What does the par value of a bond refer to?

• The interest rate of the bond

• The life or term of the bond

• The total amount of interest paid over the life of the bond

• The principal or total amount of the bond

Why are government securities considered secure/safe investments?

• They offer high interest rates

• They are backed by the government

• They are available in large quantities

• They can be traded easily

Are the interest rates on government securities generally lower or higher than corporate bonds?

• Lower because they are less risky

• Higher because they are more risky

• Lower because they are more risky

• Higher because they are less risky