Understanding Bonds and Securities

Bonds

• are securities that represent a debt owed by the issuer to the investor

• obligate the issuer to pay a specified amount at a given date, generally without periodic interest payments.

• both A and B of the above.

• none of the above.

The ________ value of a bond is the amount that the issuer must pay at maturity.

• market

• present

• discounted

• face

The ________ rate is the rate of interest that the issuer must pay.

• market

• coupon

• discount

• funds

(I) The coupon rate is the rate of interest that the issuer of the bond must pay. (II) The coupon rate is usually fixed for the duration of the bond and does not fluctuate with market interest rates.

• (I) is true, (II) false.

• (I) is false, (II) true.

• Both are true.

• Both are false.

The security with the longest maturity is a Treasury

• note.

• bond.

• none of them

• bill.

Capital market securities are less liquid and have longer maturities than money market securities.

• True

• False

Treasury bills do not

• pay interest.

• have a maturity date.

• have a face amount.

• have an active secondary market.

The usual maturity range for commercial paper is

• 1 to 270 days.

• 1 to 15 days.

• 4, 13, and 26 weeks.

• 1 to 7 days.

Money market securities are short-term instruments with an original maturity of less than one year.

• True

• False

Money market securities include Treasury bills, commercial paper, federal funds, repurchase agreements, negotiable certificates of deposit, and banker's acceptances

• True

• False