BA 240 - Chapter 7 - Bonds

bearer form

A bond that is payable to whomever has physical possession of the bond is said to be in:

early bond redemption

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

generally issued as semiannual coupon bonds

Treasury bonds are:

cannot lease any major assets without bondholder approval

An example of a negative covenant that might be found in a bond indenture is a statement that the company:

compensation investors demand for accepting interest rate risk

The interest rate risk premium is the:

term structure of interest rates

The pure time value of money is known as the:

a bond's unfavorable tax status

The taxability risk premium compensates bondholders for which one of the following?

credit risk

The yields on a corporate bond differ from those on a comparable Treasury security primarily because of:

long-term, taxable junk bond

Which bond would you generally expect to have the highest yield?

default risk

Which one of the following premiums is compensation for the possibility that a bond issuer may not pay a bond's interest or principal payments as expected?

liquidity

Which one of the following risk premiums compensates for the inability to easily resell a bond prior to maturity?

interest rate risk

Which one of the following risks would a floating-rate bond tend to have less of as compared to a fixed-rate coupon bond?

split-rated bonds are called crossover bonds

Which one of the following statements concerning bond ratings is correct?

the term structure of interest rates and the time to maturity are always directly related

Which one of the following statements is false concerning the term structure of interest rates?