Chapter 6 Recharge

Corporate bonds are long-term bonds with a minimum denomination of ______ and coupons that are paid _______ - $5,000; semiannually - $1,000; annually - $100; semiannually - $1,000; semiannually

$1,000; semiannually

Treasury notes have original issue maturities from over _____ to _____ years - 1; 10 - 2; 7 - 1; 5 - 5; 10

1; 10

A 10-year Treasury note can be separated into ______ individual STRIP securities - 20 - 11 - 10 - 21

21

Prices of Treasury STRIP securities are quoted as _______ of the ______ of the security - A percentage; face value - A multiple; face value - A multiple; coupon payment - A percentage; coupon payment

A percentage; face value

Prices of Treasury notes and bonds are quoted as _______ of the ______ of the security - A percentage; coupon payment - A multiple; face value - A multiple; coupon payment - A percentage; face value

A percentage; face value

The _______ is the yield to maturity on the Treasury note or bond using the ________ in the calculation - Asking yield; ask price - Change; bid price - Asked yield; bid price - Change; ask price

Asked yield; bid price

With ________ underwriting, the investment bank makes no guarantees but acts as a placing or distribution agent for the bonds and collects a fee - Firm commitment - Partial commitment - Low risk - Best efforts

Best efforts

Changes in the value of bond indexes can be used by bond traders to evaluate __________ of investing in bonds of different types and maturities - Changes in the attractiveness - The potential future return - The potential capital growth - The potential future risk

Changes in the attractiveness

The coupon interest paid periodically on a bond is calculated as the product of the _______ and the _______ of the bond - Yield to maturity; face value - Coupon rate; face value - Coupon rate; market price - Yield to maturity; market price

Coupon rate; face value

While Treasury bills are sold on a _______ basis, Treasury notes and bonds pay _______ interest - Discount; compound - Single payment; simple - Discount; semiannual coupon - Discount; annual coupon

Discount; semiannual coupon

In most years, the currency in which the largest amount of fixed rate debt is issued is the - Dollar - Euro - Yen - Pound

Dollar

In most years, the currency in which the largest amount of fixed rate debt is issued is the - Yen - Euro - Pound - Dollar

Dollar

True or false: Yield changes of bond market securities were uncorrelated over the period from 1980 through 2019

False

The biggest issuers of both fixed rate and floating rate debt in most years are - International institutions - Financial institutions - Corporations - Governments

Financial institutions

With ________ underwriting, the investment bank guarantees the issuer a price for newly issued bonds by purchasing the entire issue at a fixed price - Firm commitment - Partial commitment - Best efforts - Low risk

Firm commitment

The three major bond rating agencies are - Flourish & Blotts - Fitch Rating - Moody's - Borgin & Burkes - Standard & Poor's (S&P)

Fitch Ratings, Moody's, Standard & Poor's (S&P)

Globally, there is far more _______ debt than ______ debt issued - Fixed rate; floating rate - Short-term; long-term - Floating rate; fixed rate - Public sector; corporate

Fixed rate; floating rate

Two types of municipal bonds exist: _______ and _______ bonds - General obligation; revenue - General obligation; special dispensation - Revenue; coupon - General obligation; special obligation

General obligation; revenue

Municipal bonds backed by the full faith and credit of the issuer are called ______ bonds. Governments usually rely on ______ to make payments on these bonds - Credit enhanced; tax collections - General obligation; tax collections - Revenue; project revenue - Insured; fines and fees

General obligations; tax collections

Treasury STRIPS are created by and sold to investors through - The Federal Reserve Bank of New York - Commercial banks - Savings banks - Government securities brokers and dealers

Government securities brokers and dealers

The major purchasers of bond market securities (investors) are - Governments - Households - Foreign investors - Non-profits - Corporations

Governments, households, foreign investors, corporations

Unlike Treasury bills, Treasury notes and bonds are subject to _______ risk and _______ - Interest rate risk; liquidity risk - Exchange rate risk; liquidity risk - Default risk; interest rate risk - Default risk; liquidity risk

Interest rate risk; liquidity risk

With best efforts underwriting, the _______ assumes the risk that the entire bond issue might not be sold - Issuing firm - Government - Bond investors - Underwriter

Issuing firm

Bond insurance increases the ______ of bonds by making it easier to sell them on the secondary market - Yield to maturity - Coupon rate - Liquidity - Principal

Liquidity

Eurobonds are ______ bonds issued and sold outside of _______ - Long-term; the country of their currency - Short-term; Europe - Short-term; the country of their currency - Long-term; Europe

Long-term; the country of their currency

The price of a STRIP security is the ________ of the face value of the STRIP discounted using the _________ and ________ - Present value; discount rate; semiannual compounding - Present value; discount rate; annual compounding - Present value; yield to maturity; annual compounding - Present value; yield to maturity; semiannual compounding

Present value; yield to maturity; semiannual compounding

Bonds that are issued to finance a specific revenue-generating project and whose payments are made from those revenues are called _______ bonds - Highway - General obligation - Special coupon - Revenue

Revenue

Debenture holders generally receive their promised payments only after all ________ debt holders have been paid - Secured - Commercial paper - Short-term - Unsecured

Secured

The source of funds for repayment of municipal bonds is _______ or _______ - Tax receipts; library late fees - Tax receipts; tariffs and fees - Tax receipts; project revenues - Project revenues; tariffs and fees

Tax receipts; project revenues

Because general obligation bonds rely upon tax revenues for repayment, ______ is usually required - Insurance - Taxpayer approval - A special tax levy - Federal Reserve approval

Taxpayer approval

Most corporate bonds are ______ bonds, meaning that the entire issue matures on a single date - Registered - Bearer - Term - Serial

Term

Treasury STRIPS allow investors to match their ______ with the ______ of the STRIP security - Time preference for funds; maturity date - Financial needs; face value - Time preference for funds; payment amount - Investment horizon; face value

Time preference for funds; maturity date

With firm commitment underwriting, the _______ assumes the risk that the entire bond issue might not be sold - Issuing firm - Bond investors - Underwriter - Government

Underwriter

Each STRIP security must be valued as a ________ with maturity determined by its original _______ - Annual coupon bond; payment date - Zero-coupon bond; issue date - Zero-coupon bond; payment date - Semiannual coupon bond; payment date

Zero-coupon bond; payment date