Advanced Financial Literacy Unit #3 Test Review Activity

Check ALL of the answers below would BEST describe bonds.

• 2. Like stocks, they provide ownership stakes in companies.

• 1. Like stocks, bonds are publicly traded on exchanges.

• 1. Companies can use bonds to borrow money without the fuss of going to a bank.

• 1. Bonds are also known as fixed-income investments.

Which of the following would NOT use a bond to borrow money?

• State government

• Multinational corporation

• Homeowner

• School district

The entity that uses a bond to borrow money is called the

• debtholder

• issuer

• investment bank

• exchange

The amount being borrowed by the bond issuer is called the bond ________

• coupon.

• principal.

• maturity.

• duration.

Bonds use a _____________________ payment in order to pay the pay the ___________________ on the bond principal.

• coupon, profits

• coupon, interest

• dividend, profits

• rent, profits

Check ALL that apply. If the yield is rising for a bond, it is because ________________.

• 2. other bonds with similar coupon rates and maturity dates are being sold at a discount.

• 1. other bonds with similar coupon rates and maturity dates are being bought at a premium.

• 1. its price is falling.

• 2. its price is also rising.

Check ALL that apply. If the yield is falling for a bond, it is because ________________.

• 2. other bonds with similar coupon rates and maturity dates are being sold at a discount.

• 1. other bonds with similar coupon rates and maturity dates are being bought at a premium.

• 1. its price is also falling.

• 2. its price is rising.

The issuance price for a bond is called ____________ value, and is usually ____________.

• 2. par, $10,000.

• 1. par, $1,000.

• 1. maturity, $1,000.

• 1. issuance, $10.

Check ALL that apply. U.S. Treasury bonds are considered the least risky investments because the federal government

• 4. has never defaulted on its debt obligations.

• 1. has tax revenue that exceeds spending.

• credit agencies nearly always give them AAA ratings.

• 1. can issue money.

Check ALL that apply about a bond's maturity date.

• The bond issuer will pay the bond holder the face value of the bond.

• The bond holder receives his coupon payment

• Affects the duration of bond.

• Date on which the bond will mature.