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Multiple Choice Quiz
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1
Which of the following is true about a zero coupon bond?
A)It is sold at face value.
B)You pay taxes on the interest earned each year even though you don't receive it until maturity.
C)Zero coupon bonds are less volatile than other types of bonds.
D)The interest on a zero coupon bond is paid semi-annually.
E)All of the above are characteristics of zero coupon bonds.
2
A bond has the following listing in the Wall Street Journal.
TVA6.125Jan 3, 201290.57.3

What is the interest payment per year for this bond?
A)$90.50
B)$61.25
C)$730
D)$34
E)None of the above
3
A bond is selling the market for $905 dollars and has an interest rate of 6.125%. This bond has a face value of $1000 and has 12 years to maturity. Using the formula given in the book, what is the yield to maturity on this bond?
A)6.8%
B)12.0%
C)6.1%
D)7.3%
E)None of the above
4
A bond has the following listing in the Wall Street Journal?
SBC7.25Dec, 14, 2024106.3756.75

What is the interest payment per year on this bond according to this listing?
A)$67.50
B)$140.00
C)$72.50
D)$106.375
E)None of the above
5
You have a debenture bond that is rated BBB? Which of the following would cause this bond to have a lower interest rate?
A)If the bond were rated CCC instead of BBB
B)If it was also a callable bond
C)If it was a subordinated debenture bond
D)If it was also a convertible bond
E)None of the above would make it have a lower interest rate.
6
The Federal Housing Administration (FHA) is issuing bonds so that they can make mortgages to lower income homeowners. What type of bonds are these?
A)Treasury Bonds
B)General Obligation Municipal Bonds
C)Revenue Municipal Bonds
D)Government Agency Bonds
E)None of the above
7
You have a bond that has 8 years to maturity and has a coupon rate of 6.5%. It has a face value of $1000 and is selling in the market for $925. Interest is paid annually on this bond. What is the current yield on this bond?
A)6.5%
B)8.0%
C)7.0%
D)7.7%
E)None of the above
8
The _______________ is the date on which the corporation is to repay the borrowed money.
A)The end of the year
B)The current date
C)The maturity date
D)The bondholder's date
E)None of the above
9
The _______________ is a financially independent firm that acts as the bondholders' representative.
A)Indenture
B)Debenture
C)Sinking fund
D)Trustee
E)None of the above
10
A(n) _______________ is a bond that is unsecured and which has a claim that is secondary to the claim of other designated bondholders.
A)Debenture bond
B)Mortgage bond
C)Subordinated debenture bond
D)Callable bond
E)None of the above





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