Chapter 13- Investing in Bonds and Other Alternatives
C. Secured
Any bond that is backed by the pledge of collateral is known as what type of bond? A. Recalled B. Sinking C. Secured D. Agency E. Collateralized
C. Bonds may be called when interest rates drop
Bonds enjoy all but one of the following advantages. Which is it? A. They reduce risk through diversification. B. They can be a safe investment if held to maturity. C. Bonds may be called when interest rates drop. D. When interest rates drop, bond prices rise. E. Bonds produce steady income.
True
Bonds reduce risk through diversification.
True
Bonds which are very low rated, yet high yielding bonds are known as junk bonds.
True
If you are already retired and seek additional income, then bonds as an investment choice would be wise.
True
Interest payments on municipal bonds are exempt from federal taxes and state taxes as long as you live in the state in which the bonds were issued.
True
TIPS are treasury bonds for which the par value changes with the consumer price index.
True
The face value of a bond, or the amount that is returned to the bondholder at maturity is also known as the bond's denomination.
False
The issuer of the bond is effectively loaning money to the bondholder when the bond is purchased.
False
The par value of the bond is the rate at which payments will be made to the bondholder annually, in the form of interest.
D. All of the above are correct
What could happen if you sell a bond before its maturity date? A. You could have a capital loss. B. You could break even with the price you paid for the bond. C. You could have a capital gain. D. All of the above are correct. E. Only A and C are correct.
D. All of the Above
Why might you consider investing in bonds? A. Bonds reduce risk through diversification. B. Bonds can be safe investment if held to maturity. C. Bonds produce steady income. D. All of the above
B. XYZ Company will call their bonds in
XYZ company issued bonds three years ago with a 7% coupon rate. Today, the market rate of interest was lowered to 4%. What most likely will happen next? A. XYZ company will raise the coupon rate of their bonds. B. XYZ company will call their bonds in. C. XYZ company will lower the par value of their bonds. D. None of the above is correct.