Quiz on Bonds and Preference Shares

A bond is best described as:

• Ownership security

• A fixed-income debt instrument

• Equity share

• Derivative instrument

Which of the following is a common feature of a bond?

• Maturity date

• Coupon rate

• Face value

• All of the above

Bonds are issued mainly to:

• Provide long-term finance for governments and corporations

• Speculate in the stock market

• Replace equity shareholders

• Increase bank reserves

A bond without periodic interest payments but issued at a discount is called:

• Convertible bond

• Zero-coupon bond

• Callable bond

• Perpetual bond

A bond that can be converted into equity shares at a later date is called:

• Convertible bond

• Redeemable bond

• Debenture

• Perpetual bond

Perpetual bonds are characterized by:

• No maturity date

• Zero coupon

• Issued only by banks

• Convertible into equity

Which factor most affects bond safety?

• Issuer’s creditworthiness

• Coupon rate only

• Trading volume

• Speculation in market

Credit rating agencies evaluate bonds mainly for:

• Market liquidity

• Risk of default

• Capital appreciation

• Tax exemption

When market interest rates rise, bond prices:

• Rise

• Fall

• Remain unchanged

• Double

The yield of a bond is best defined as:

• Fixed dividend paid annually

• Return an investor earns from bond investment

• Face value of the bond

• Trading price of equity