Personal Finance: Chapter 12 Review

A debenture (general obligation bond) is a corporate bond that has less risk than a mortgage bond.

• True

• False

The greater the risk of an investment typically yields the potential for a higher return to the investor.

• True

• False

To pay for a new school, a local government may issue a municipal bond.

• True

• False

A sinking fund means a bond is losing value.

• True

• False

Naomi purchased a Kraft Foods bond with an S&P rating of "BBB". Her bond is best described as:

• a. a risk-free bond

• b. a junk bond

• c. an investment-grade bond

• d. a speculative bond

A typical corporate bond states all of the following facts about the bond EXCEPT ____.

• the amount of interest dollars paid

• the interest rate

• the maturity date

• its face value

A mutual fund investor can gain all of the following types of income EXCEPT:

• income dividends

• capital gains

• semi-annual interest checks

• capital gain distributions

Isabella bought a registered zero-coupon bond and discovered that it differs from other bonds because:

• provides no regular interest payments and bought at a discount

• provides no regular interest payments

• anyone in possession of the physical certificate can collect the face value

• bought at a discount off of face value

An investor can trade a bond for shares of the corporate stock if the bond is a ____.

• mortgage bond

• debenture

• subordinated debenture

• convertible bond

To reach maturity, Treasury bills take between ____.

• 10 to 30 years

• 1 to 30 years

• 1 to 10 years

• 4 to 52 weeks