Interest Rates and Bond Valuation: Answer Key for Multiple Choice Questions Essay Example
Multiple Choice Questions 1. The stated interest payment, in dollars, made on a bond each period is called the bond's:
A. coupon.
2. The principal amount of a bond that is repaid at the end of the term is called the:
B. face value.
3. The specified date on which the principal amount of a bond is repaid is called the:
C. maturity.
4. The rate of return required by investors in the market for owning a bond is called the:
D. yield to maturity.
5. The annual coupon divided by the face value of a bond is called the:
E. coupon rate.
6. The annual coupon payment divided by the market price of a bond is called the:
B. current yield.
7. An indenture is:
E. the written agreement between the bond issuer and the bondholders which details the terms of the debt issue.
8. A bond for which the registrar of the issuer records ownership and for which payments are made directly to the owner of record is said to be in:
B. registered form.
9. A bond which is issued without recording of the owner's name and for which payments are made to whomever has physical possession of the bond is said to be in:
C. bearer form.
10. An unsecured debt of a firm with a maturity of 10 years or more is called a(n):
E. debenture.
11. An unsecured debt of a firm with a maturity of less than 10 years is called a(n):
D. note.
12. An account managed by a bond trustee for early bond redemption payments is called a:
A. sinking fund.
13. An agreement giving the bond issuer the option to repurchase the bond at a specified price prior to maturity is the _____ provision.
B. call
14. The amount by which the call price exceeds the bond's par value is the:
C. call premium.
15. A deferred call provision refers to the:
D. prohibition which prevents bond issuers from redeeming callable bonds prior to a specified date.
16. A bond which currently cannot be called but is eligible for a call at a later date is referred to as a:
B. call-protected bond.
17. Parts of the
A. coupon.
2. The principal amount of a bond that is repaid at the end of the term is called the:
B. face value.
3. The specified date on which the principal amount of a bond is repaid is called the:
C. maturity.
4. The rate of return required by investors in the market for owning a bond is called the:
D. yield to maturity.
5. The annual coupon divided by the face value of a bond is called the:
E. coupon rate.
6. The annual coupon payment divided by the market price of a bond is called the:
B. current yield.
7. An indenture is:
E. the written agreement between the bond issuer and the bondholders which details the terms of the debt issue.
8. A bond for which the registrar of the issuer records ownership and for which payments are made directly to the owner of record is said to be in:
B. registered form.
9. A bond which is issued without recording of the owner's name and for which payments are made to whomever has physical possession of the bond is said to be in:
C. bearer form.
10. An unsecured debt of a firm with a maturity of 10 years or more is called a(n):
E. debenture.
11. An unsecured debt of a firm with a maturity of less than 10 years is called a(n):
D. note.
12. An account managed by a bond trustee for early bond redemption payments is called a:
A. sinking fund.
13. An agreement giving the bond issuer the option to repurchase the bond at a specified price prior to maturity is the _____ provision.
B. call
14. The amount by which the call price exceeds the bond's par value is the:
C. call premium.
15. A deferred call provision refers to the:
D. prohibition which prevents bond issuers from redeeming callable bonds prior to a specified date.
16. A bond which currently cannot be called but is eligible for a call at a later date is referred to as a:
B. call-protected bond.
17. Parts of the