investments exam 3

In a typical bond classification

a. "A" are investment grade bonds

b. "B" stands for a "bearer" bond

 c. "C" stands for a convertible bond

d. "D" represents a debenture

a. "A" are investment grade bonds

Zero coupon bonds                 

a. are sold at a discount

b. are sold for a premium

c. accrue interest at maturity

d. cannot be called

a. are sold at a discount

A firm will exercise its option to call a bond if interest rates rise.

True

False

False

The indenture specifies the terms of a bond.

True

False

True

Virtually all bonds have each of the following except

a. interest payments

b. maturity date

c. voting rights

d. an indenture

c. voting rights

Bonds may be retired by

       1. being called

       2. a sinking fund

       3. being repurchased         

a. 1 and 2

b. 1 and 3

 c. 2 and 3

d. all of the above

d. all of the above

A negatively sloped yield curve occurs when short-term rates exceed long‑term rates.

True

False

True

An investor concerned with safety of principal may purchase preferred stock instead of bonds issued by the same company.

True

False

False

Since bonds are legal obligations, their prices are determined when issued and do not change.

True

False

False

A high yield bond

a. pays no interest

 b. pays interest only at maturity

c. is a high‑risk debt instrument

d. is a bond in default

c. is a high‑risk debt instrument