BONDS

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

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

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

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

• classified bond

• discount bond

• compound bond

• consideration earnings

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

What is a coupon?

• something you use in a supermarket to decrease your cost

• an asset bought in the stock market

• used in the stock market to lessen the initial cost of stocks

• the interest rate on a bond at the time it is issued

If a bond was issued with a 5% coupon rate and the market rate is now 8%, the coupon payment:

• Goes up

• Goes down

• Stays the same

What will happen to the market value of a bond if interest rates rise?

• market value will decrease

• market value will increase

• Stay the same

• No idea