Finance Test

investors will sell stock at the:

bid price

a _________________ will only be executed if the order's price conditions are met

limit order

the dow jones industrial average (DJIA) includes:

30 of the largest (market capitalization) and most active companies in the US economy

What does a call provision allow issuers to do, and why would they do it?

A call provision on a bond issue allows the issuer to pay off the bond debt early at a cost of the principal plus any call premium.

Provide the definitions of a discount bond and a premium bond

A discount bond is simply a bond that is selling below its par value. It would be quoted at a price that is less than 100 percent of par, like 99.05. A premium bond is a bond selling above its par value. Its price will be quoted as over 100 percent of par value, like 101.15. A bond becomes a discount bond when market interest rates rise above the bond's coupon rate. A bond becomes a premium bond when market interest rates fall below the bond's coupon rate. 

bonds are issued by:

corporations, federal government or its agencies, state and local governments

there is a(n) ___________________ relationship between bond prices and bond yields

inverse

if a bond is selling at a premium, then:

its coupon rate must be greater than its yield

all else the same, an investor will require _____________ return to invest in a callable bond than one that is not callable

more

which of the following means the chance that future interest payments will have to be reinvested at a lower interest rate?

reinvestment rate risk

long-term bonds have more interest rate than

short-term bonds

if a bond is selling at par value, the current yield must equal _________________

the coupon rate and the yield to maturity