WorksheetsBond Fundamentals
Total questions: 20
Worksheet time: 10mins
Which of the following correctly describes a debenture in the United States?
A secured bond backed by real property
An unsecured corporate bond
A short-term government note
A convertible preferred share
Which bond type pays interest that depends on royalties from an asset such as a film or book?
Catastrophe bond
Indexed bond
Asset-backed bond
Inverse floater
A bond callable only after five years is said to have which feature?
Deferred call
Noncallable
Nonrefunding
Convertible
The relationship between bond price and yield is:
Linear and positive
Non-linear and convex
Constant
Inverse and linear
What is the yield on a bond if its coupon rate equals its market yield?
Premium
Discount
At par
Zero-coupon
Which of the following statements about high-yield (junk) bonds is TRUE?
They are rated BBB or above
They are also called speculative bonds
They offer lower returns than investment-grade bonds
They are always issued by governments
The risk that an issuer will not make interest or principal payments is known as:
Liquidity risk
Market risk
Default risk
Call risk
The yield to maturity (YTM) assumes:
The bond is sold before maturity
All coupons are reinvested at the YTM rate
The bond has a floating coupon rate
There are no reinvestments
The market price of a zero-coupon bond will always be:
Greater than par
Equal to par
Less than par
The same as its coupon rate
In a corporate bond quote, the 'spread' usually represents:
Difference between coupon and par value
Difference between YTM of a corporate and a government bond
Difference between bid and ask price
Change in bond price
A sinking fund provision:
Increases the bond’s maturity value
Requires periodic repayment of principal
Converts debt into equity
Allows the issuer to skip interest payments
Eurobonds are:
Bonds issued by the EU
Bonds denominated in multiple currencies
Bonds underwritten by international syndicates and sold in several markets
Bonds issued in euros only
Which yield measure best captures the investor's total return if the bond is sold early?
Nominal yield
Current yield
Yield to maturity
Realized (horizon) yield
When computing accrued interest, the investor pays:
Only the bond’s clean price
Clean price minus accrued interest
Clean price plus accrued interest
Face value only
The difference between secured and unsecured bonds is mainly related to:
Coupon frequency
Collateral backing
Issuer’s size
Marketability
Which of the following correctly pairs the rating agency with its investment grade threshold?
Moody’s: Ba and above
S&P: BB and above
Moody’s: Baa and above
S&P: B and above
The main purpose of bond ratings is to:
Indicate price volatility
Reflect credit risk and default probability
Determine coupon frequency
Calculate yield spreads
Which of the following features best protects bondholders from excessive new debt issuance?
Call premium
Dividend restriction
Subordination clause
Conversion option
A bond with a coupon rate lower than the market yield will trade at:
Premium
Discount
Par
Face value
The yield to call differs from the yield to maturity mainly in:
The timing and price used for redemption
The calculation method
The type of coupon
The reinvestment assumption
