## Mirror for Humanity Study Set 1

Anthropology

## Quiz 17 :

Bond Fundamentals

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Q01 Q01 Q01

Exhibit 18.3
USE THE INFORMATION BELOW FOR THE FOLLOWING PROBLEM(S)
A $1000 par value bond with 4 years to maturity and a 5% coupon has a yield to maturity of 6%. Interest is paid annually.
-Public bonds differ from other debt because they are sold to the public rather than to a single investor.

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True False

True

Q02 Q02 Q02

Exhibit 18.3
USE THE INFORMATION BELOW FOR THE FOLLOWING PROBLEM(S)
A $1000 par value bond with 4 years to maturity and a 5% coupon has a yield to maturity of 6%. Interest is paid annually.
-A nonrefunding provision prohibits a call and premature retirement of an issue from the proceeds of a lower-coupon refunding bond.

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True False

True

Q03 Q03 Q03

Exhibit 18.3
USE THE INFORMATION BELOW FOR THE FOLLOWING PROBLEM(S)
A $1000 par value bond with 4 years to maturity and a 5% coupon has a yield to maturity of 6%. Interest is paid annually.
-In the case of a bond, the only contractual factor is the amount of interest payments, since beginning and ending bond prices are determined by market forces.

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True False

True

Q05 Q05 Q05

Exhibit 18.3
USE THE INFORMATION BELOW FOR THE FOLLOWING PROBLEM(S)
A $1000 par value bond with 4 years to maturity and a 5% coupon has a yield to maturity of 6%. Interest is paid annually.
-Wealthy individual investors typically account for 90 to 95 percent of investors in the bond market.

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True False

Q07 Q07 Q07

Exhibit 18.3
USE THE INFORMATION BELOW FOR THE FOLLOWING PROBLEM(S)
A $1000 par value bond with 4 years to maturity and a 5% coupon has a yield to maturity of 6%. Interest is paid annually.
-Government bond issues require an annual sinking fund payment of not less than one percent of the outstanding issue.

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True False

Q08 Q08 Q08

Exhibit 18.3
USE THE INFORMATION BELOW FOR THE FOLLOWING PROBLEM(S)
A $1000 par value bond with 4 years to maturity and a 5% coupon has a yield to maturity of 6%. Interest is paid annually.
-Most U.S. municipal bonds are serial issues which are subject to state and local taxes when they are issued in the investor's home state.

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True False

Q09 Q09 Q09

Exhibit 18.3
USE THE INFORMATION BELOW FOR THE FOLLOWING PROBLEM(S)
A $1000 par value bond with 4 years to maturity and a 5% coupon has a yield to maturity of 6%. Interest is paid annually.
-The secondary bond market is significantly more active than the stock market.

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True False

Q11 Q11 Q11

Exhibit 18.3
USE THE INFORMATION BELOW FOR THE FOLLOWING PROBLEM(S)
A $1000 par value bond with 4 years to maturity and a 5% coupon has a yield to maturity of 6%. Interest is paid annually.
-A bond's price is determined by the issue's coupon rate, length to maturity, and the prevailing yield in the market.

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True False

Q12 Q12 Q12

Exhibit 18.3
USE THE INFORMATION BELOW FOR THE FOLLOWING PROBLEM(S)
A $1000 par value bond with 4 years to maturity and a 5% coupon has a yield to maturity of 6%. Interest is paid annually.
-Bonds can have different types of collateral and can be either secured, unsecured or registered bonds.

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True False

Q13 Q13 Q13

Exhibit 18.3
USE THE INFORMATION BELOW FOR THE FOLLOWING PROBLEM(S)
A $1000 par value bond with 4 years to maturity and a 5% coupon has a yield to maturity of 6%. Interest is paid annually.
-A bond's maturity is affected by: call features, non-refunding provisions, and sinking fund provisions.

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True False

Q59 Q59 Q59

A 4.75 percent coupon bond issued by the State of Washington sells for $1,000. What coupon rate on a corporate bond selling at $1,000 par value would produce the same after tax return to the investor as the municipal bond if the investor is in the 28 percent marginal tax bracket?

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Multiple Choice

Q60 Q60 Q60

A 6.5 percent coupon bond issued by the State of California sells for $1,000. What coupon rate on a corporate bond selling at $1,000 par value would produce the same after tax return to the investor as the municipal bond if the investor is in the 26 percent marginal tax bracket?

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Multiple Choice

Q61 Q61 Q61

An 8.5 percent coupon bond issued by the State of Ohio sells for $1,000. What coupon rate on a corporate bond selling at $1,000 par value would produce the same after tax return to the investor as the municipal bond if the investor is in the 25 percent marginal tax bracket?

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Multiple Choice

Q62 Q62 Q62

A 7.0 percent coupon bond issued by the State of Tennessee sells for $1,000. What coupon rate on a corporate bond selling at $1,000 par value would produce the same after tax return to the investor as the municipal bond if the investor is in the 29 percent marginal tax bracket?

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Multiple Choice

Q84 Q84 Q84

Exhibit 17.2
USE THE INFORMATION BELOW FOR THE FOLLOWING PROBLEM(S)
XLR Corporation just issued a $1,000 par value bond with a 7% yield to maturity, twenty years to maturity, with an 8% semi-annual coupon rate.
-Refer to Exhibit 17.2. What is the price of the XLR Corporate bond?

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Multiple Choice

Q85 Q85 Q85

Exhibit 17.2
USE THE INFORMATION BELOW FOR THE FOLLOWING PROBLEM(S)
XLR Corporation just issued a $1,000 par value bond with a 7% yield to maturity, twenty years to maturity, with an 8% semi-annual coupon rate.
-Refer to Exhibit 17.2. If market interest rates are constant, what will the price of the XLR Corporate bond be in three years?

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Multiple Choice

Q86 Q86 Q86

Exhibit 17.2
USE THE INFORMATION BELOW FOR THE FOLLOWING PROBLEM(S)
XLR Corporation just issued a $1,000 par value bond with a 7% yield to maturity, twenty years to maturity, with an 8% semi-annual coupon rate.
-Refer to Exhibit 17.2. If market interest rates rise to 10%, what will the price of the XLR Corporate bond be in three years?

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Multiple Choice

Q87 Q87 Q87

A 9.0 percent coupon bond issued by the State of Iowa sells for $1,000. What coupon rate on a corporate bond selling at $1,000 par value would produce the same after tax return to the investor as the municipal bond if the investor is in the 30 percent marginal tax bracket?

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Multiple Choice