Exam 2 TF Questions

If a company is performing very well, investors in that company’s bonds are likely to receive a higher coupon payment than the coupon payment indicated by the bond’s coupon rate, face value, and frequency of coupon payments (annual or semi-annual).

False

If a company is performing very poorly, investors in that company’s bonds may receive a lower coupon payment than the coupon payment indicated by the bond’s coupon rate, face value, and frequency of coupon payments (annual or semi-annual).

True

If Green Lake Vending is performing very poorly and the firm fails to make promised coupon payments to bondholders, then the bondholders can take legal recourse against the firm.

True

If Green Lake Vending is performing very poorly and the firm fails to make promised coupon payments to bondholders, then the bondholders cannot take legal recourse against the firm.

False

Foreign countries, states, cities, counties, corporations, and the U.S. government are all entities that issue bonds. Note that this statement is true if all six entities issue bonds and that this statement is false if one or more of the six entities does not issue bonds.

True

Interest on some government bonds is not subject to income tax at the state level.

True

Interest on some government bonds is not subject to income tax at the federal level.

True

Today, 1,000 bonds issued by Green Lake Vending were bought by a variety of investors for $1,000 per bond. If Green Lake Vending received $1 million from the sale of these bonds, then the 1,000 bonds were more likely sold on the primary market than on the secondary market.

True

Today, 1,000 bonds issued by Green Lake Vending were bought by a variety of investors for $1,000 per bond. If Green Lake Vending received $1 million from the sale of these bonds, then the 1,000 bonds were more likely sold on the secondary market than on the primary market.

False

Today, 1,000 bonds issued by Green Lake Vending were bought by a variety of investors for $1,000 per bond. If Green Lake Vending received $0 from the sale of these bonds, then the 1,000 bonds were more likely sold on the primary market than on the secondary market.

False

Today, 1,000 bonds issued by Green Lake Vending were bought by a variety of investors for $1,000 per bond. If Green Lake Vending received $0 from the sale of these bonds, then the 1,000 bonds were more likely sold on the secondary market than the primary market.

True