Unit 4 Checkpoint

In general, commercial paper, a popular money market instrument, has a maturity not exceeding

270 days

A bond with a 9% coupon, maturing in 18 years and 6 months, is selling at 120. The yield to maturity is closest to A) 9.00%. B) 7.50%. C) 11.66%. D) 7.05%.

D) 7.05% bond trading at a premium of 120% of par so all the computed returns must be lower than the 9% nominal (coupon) yield 7.5% is current yield (90/1200) for a premium nominal yield is the highest, followed by CY, then YTM, and finally YTC

It would be most unusual to see which of the following issued at a discount? A) Treasury bill B) Jumbo CD C) Banker's acceptance D) Commercial paper

JUMBO cd

An investor is concerned about safety. When consulting the ratings, which of the following securities would appear to be least likely to default on its obligation to make timely payment of interest and principal? A) AAA rated common stock B) BB rated sovereign debt C) A rated mortgage bond D) AA rated debenture

D AA rated Debenture agency takes collateral backed into account when giving ratings

Which of the following is an example of sovereign debt? A) Royal Bank of Canada CDs B) Bank of England notes C) U.S. Treasury bonds D) Sony Corporation debentures

US Treasuery bonds royal bank is private bank of england notes are paper currency issued

a debenture is a debt security

containing an indenture

Jumbo (negotiable) CDs are one of the few money market instruments issued at

face value. Unlike those issued at a discount, they are interest bearing.

A corporate bond is quoted in the Wall Street Journal as follows: Bid: 100½ Asked: 100¾ Bid Chg.: -⅛ Yield: 5.75 From this information, you know the nominal yield is

greater than 5.75% bc this is trading at a premium and the 5.75 is the ytm so the nominal yield is greater than this

Which of the following would be considered an equity security? A) Negotiable CDs B) Exchange-traded notes C) Preemptive rights D) Equity-linked notes

preemptive rights

If interest rates increase, the interest payable on outstanding corporate bonds will

remain unchanged

bond resolution is a

term used for municipal bonds, not corporate debt

When a corporation issues a debt security, the terms of the loan are expressed in a document known as the bond's deed of trust. The deed of trust is sometimes referred to as A) the debenture. B) the bond resolution. C) the indenture. D) the loan agreement.

the bond resolution

the indenture is also referred to as

the deed of trust states the issuer's obligation to pay back a specific amount of money on a specific date