Ch 11 Review

The three (3) advantages that corporations have by issuing convertible bonds are:

Interest rates are lower. Convertible feature attracts investors who are interested in speculative gain. If the bond is converted, it no longer has to be redeemed at maturity.

A call feature allows the corporation to buy outstanding bonds from current bondholders ______ the maturity date.

before

A bond that can be exchanged, at the owner's option, for a specified number of shares of the corporation's common stock is called a:

convertible bond

A bond that is backed only by the reputation of the issuing corporation is called a:

debenture

A growth company

has no dividend

A corporate bond is a corporation's written pledge to repay a specified amount of money along with ____.

interest

What type of risk associated with preferred stocks or government or corporate bonds is the result of changes in the interest rates of the economy?

interest rate risk

A short-term loan that is approved before the money is actually needed is a(n):

line of credit

A debt security issued by a state or local government is called a:

municipal bond

Three (3) ways that the Internet can help you invest in bonds are:

price information research information online lower commission with online trades

A fund to which annual or semiannual deposits are made for the purpose of redeeming a bond issue is a _______.

sinking fund

A general obligation bond is a bond backed by the full faith, credit, and unlimited ____ power of the government that issued it.

taxing

As interest rates decreases bond prices increase.

true

As interest rates increases bond prices decrease.

true