Investor Classification and Bonds Quiz

What type of investment behavior do risk averters exhibit?

• Will pay more than expected value for uncertain actions

• Will pay less for uncertain actions

• Will avoid all investments

• Will pay equal to expected return

What is the role of the trustee in a bond indenture?

• To provide legal advice to the company

• To manage the company's finances

• To represent the bondholders

• To issue new bonds

Which of the following is a feature of bonds?

• Face value

• Dividend yield

• Stock options

• Market capitalization

What does the bond indenture primarily incorporate?

• The company's annual revenue

• The bondholder's credit score

• An agreement between the company, bondholder, and trustee

• The company's stock price

What is the primary purpose of a bond?

• To increase stock market value

• To raise capital for the issuer

• To provide equity in a company

• To pay dividends to shareholders

How do interest rates affect bond prices?

• Interest rates have no effect on bond prices

• Higher interest rates decrease bond prices

• Lower interest rates decrease bond prices

• Higher interest rates increase bond prices

What is a callable bond?

• A bond that is issued at a discount

• A bond that pays interest only at maturity

• A bond that can be redeemed by the issuer before maturity

• A bond that can be converted into stock