PF Chapter 11 Quiz

Which of the following are advantages of purchasing securities issued by the U.S. Treasury?

- Decreased risk of default - Backed by the government - Safe investment

A bond that is repaid from the income generated by the project it is designed to finance is called a:

Revenue bond

A rise in the general level of prices is called:

Inflation

Which is used to provide up-to-date price, research, and lower commission for bonds

Internet

True or false: Revenue bonds are municipal bonds that are repaid from the income generated by the project it is designed to finance.

True

The advantage for an investor to trade bonds through an online broker is discounted commissions on trades.

true

Tom has invested in TIPS. In the past year, the inflation rate was 4 percent. Tom earns

4 percent on his investment

A price quote of 79 on a bond means:

79 percent of the face value

Which of the following is NOT true about bonds?

Bonds are often recommended over bond funds for small investors

Which of the following statements is not a factor to consider in choosing different investments?

If you invest in high quality stocks, there is no need to monitor your investments.

Which of the following is NOT true?

Many people in today's economy choose CD's because of their high rates of return

Which of the following is NOT a factor to consider when choosing different investments?

Tax consequence of selling investments are NOT important

Which of the following is NOT true regarding callable bonds?

The bonds are redeemed early at the option of the bondholder

A typical bond transaction would not include:

advice and information from your discount broker

A mortgage bond is a corporate bond secured by various _____ of the issuing _____

assets; firm

A feature that allows the corporation to call in or buy outstanding bonds from current bondholders before the maturity date is a:

call feature

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

With a lower risk of a bond and the possible high return of a stock, investors may choose which investment option?

convertible bonds

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

convertible; stock

A corporation's written pledge to repay a specified amount of money with interest is called a:

corporate bond

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

debenture

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

debenture

True or false: Investors may choose a convertible bond because it has the higher risk of a corporate bond, but they can also take advantage of the speculative nature of common stock.

false

The US treasury is an example of a

federal agency publications with information on bonds

A municipal government bond backed by the full faith, credit, and unlimited taxing power of the government that issued it is called:

general obligation bond

Speculative investments assume a

high level of risk

Treasury bonds have slightly _____ interest rate than T-notes or T-bills

higher

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

interest

A person may prefer bonds over stocks because the bond _____ payments are guaranteed

interest

U.S. Treasury securities are a very low-risk investment that many investors use to allocate their investments and bring their overall risk down. Because of this low risk, they also offer a low _____ rate

interest

When searching for information on investments, selective use of the _____ is essential

internet

The ability to buy or sell an investment quickly without substantially affecting the investments value is called:

liquidity

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

lower commission with online trades; research information online; price information

"I want to make $300 quarterly for the next three years". This goal is not only specific but because it mentions a number, it is also:

measurable

A corporate bond secured by various assets of the issuing firm is called a-taken directly from the text:

mortgage bond

Government and corporate bonds are often seen as _____ investments than stocks

safer

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

sinking

Treasury inflation-protected securities pays interest every _____ months at a fixed rate

six

A municipal bond is a debt security issued by a _____ or local _____

state; government

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

taxing

Mutual funds are not included in this list of typical investments because

they invest in the assets on the list

True or false: Investors purchase corporate bonds for interest income, increase in value, and repayment at maturity.

true

Among other factors, a person's priorities, age, and personal _____ affect his or her investment goals

values