Personal Finance Chapter 18
When a bond issuer cannot meet the interest and/or principal payments, what has occurred?
bond default
The amount a bondholder will be paid at maturity is called
face value
A bond's current yield is computed by dividing the bond's interest rate by its closing value.
false
Another name for a secured bond is a convertible bond.
false
Both the interest rate and the market price of a bond are fixed.
false
Corporate bonds are usually sold in units of $100, making them very attractive for individual investors.
false
Interest received on a corporate bond is not taxable.
false
People who own corporate bonds receive interest payments every month.
false
Typically, a bond fund contains only investment-grade bonds.
false
A revenue bond is a type of municipal bond that
finances public-works projects such as airports and hospitals
One main distinction between stocks and bonds is that
unlike stock dividends, a bond's interest does not go up and down.
You can buy up to $100,000 worth of U.S. savings bonds each year.
false
Junk bonds have higher yields than investment-grade bonds.
true
Most corporate, municipal, and agency bonds are purchased on the primary market, also known as the new issue market.
true
Municipal bonds generally pay a lower interest rate than corporate bonds.
true
The interest rate is the main factor that affects bond prices.
true
Today, most bonds are registered.
true
Which of the following types of bonds cannot be purchased through TreasuryDirect?
corporate bonds
A type of corporate bond based on the general creditworthiness of the company is called a(n)
debenture
An investment-grade bond
is considered the highest-quality, lowest-risk bond.
Corporations usually agree not to call bonds for the first ___ years after issuance.
5
When bonds sell for more than their face value, they are selling at a
premium
Bond prices
tend to remain steadier than stock prices
Bond maturities typically range from 1 to 30 years.
true
Bonds often appreciate in value, especially when interest rates are dropping.
true