ch. 23 fiance

You purchased a Microsoft bond for $500, which promises to pay you 5% interest. If the market interest rate is currently 7% and you want to sell your bond, you can expect to receive

A. less than $500.

Which of the following statements are true about U.S. Treasury securities?

A.The U.S. government sells bonds when it wants to spend more than it receives in tax revenue. B.Foreign ownership of U.S. Treasury securities has increased in recent years.

Which of the following statements is/are true about home mortgages in the United States?

A.The most common U.S. mortgage lasts 30 years and is paid off with monthly payments.

Which of the following statements about stocks and bonds are correct?

B.Both stocks and bonds provide financing avenues for a firm. d.Those who buy stock in a company actually own a percentage of the company. Those who own bonds do not own part of the company.

Which of the following statements about bonds are true?

C.A bond's price and its interest rate are negatively related. D.AAA is Standard & Poor's highest bond rating possible.

Which of the following are parts of a bond?

C.the par value D.the date of maturity E.the name of the borrower

What does the "par value" of a bond represent?

D. the price of the bond at maturity

The presence of secondary markets ______________ the interest rates that firms have to pay on the bonds they issue.

decreases

For each of the following situations, is the financing considered direct or indirect?

direct John provides microfinance loans to poor farmers in Bangladesh. Jerry gets a loan of $400 from his friend, Joan. indirect Your parents take out a mortgage to buy a house. You take out a car loan from the bank.

You purchased a bond issued by a company called Salty Snack Corporation. The bond was rated BBB. A few months later you find out that the rating of Salty Snack bonds has changed to AA. You can conclude that Salty Snack will pay lower interest rates on any new bonds that it issues.

lower

a. NASDAQ is a large The existence of markets such as NASDAQ makes borrowing less expensive.

secondary less

When a company combines several home mortgages together and sells them as a new financial instrument, the company is engaging in the process of

securitization