Chapter 7 Finance 300

Early Bond Redemption

A sinking fund is managed by a trustee for which one of the following purposes?

Dirty Price

Pete paid $1,032 as his total cost of purchasing a bond. This price is referred to as the:

are primarily designed to protect bondholders.

Protective covenants:

Nominal Rates

Interest rates that include an inflation premium are referred to as:

The legal agreement between the bond issuer and the bondholders.

An indenture is:

II and III only

Which of the following defines a note? I. secured II. unsecured III. maturity less than 10 years IV. maturity in excess of 10 years

The yield-to-maturity is less than the coupon rate

A 6 percent, annual coupon bond is currently selling at a premium and matures in 7 years. The bond was originally issued 3 years ago at par. Which one of the following statements is accurate in respect to this bond today?

maturity

A Treasury yield curve plots Treasury interest rates relative to which one of the following?

Clean Price

A bond is quoted at a price of $989. This price is referred to as which one of the following?

Callable

A bond that can be paid off early at the issuer's discretion is referred to as being which one of the following?

a discount ; less than

All else constant, a bond will sell at _____ when the coupon rate is _____ the yield to maturity.

are considered to be free of default risk.

Bonds issued by the U.S. government:

Have a sinking fund provision

Callable bonds generally:

Yield to Maturity

Currently, the bond market requires a return of 11.6 percent on the 10-year bonds issued by Winston Industries. The 11.6 percent is referred to as which one of the following?

Inflation

Real rates are defined as nominal rates that have been adjusted for which of the following?

Decrease the market value

The Walthers Company has a semi-annual coupon bond outstanding. An increase in the market rate of interest will have which one of the following effects on this bond?

Default Risk

Which one of the following risk premiums compensates for the possibility of nonpayment by the bond issuer?