Chapter 6 Recharge
Corporate bonds are long-term bonds with a minimum denomination of ______ and coupons that are paid _______ - $5,000; semiannually - $1,000; annually - $100; semiannually - $1,000; semiannually
$1,000; semiannually
Treasury notes have original issue maturities from over _____ to _____ years - 1; 10 - 2; 7 - 1; 5 - 5; 10
1; 10
A 10-year Treasury note can be separated into ______ individual STRIP securities - 20 - 11 - 10 - 21
21
Prices of Treasury STRIP securities are quoted as _______ of the ______ of the security - A percentage; face value - A multiple; face value - A multiple; coupon payment - A percentage; coupon payment
A percentage; face value
Prices of Treasury notes and bonds are quoted as _______ of the ______ of the security - A percentage; coupon payment - A multiple; face value - A multiple; coupon payment - A percentage; face value
A percentage; face value
The _______ is the yield to maturity on the Treasury note or bond using the ________ in the calculation - Asking yield; ask price - Change; bid price - Asked yield; bid price - Change; ask price
Asked yield; bid price
With ________ underwriting, the investment bank makes no guarantees but acts as a placing or distribution agent for the bonds and collects a fee - Firm commitment - Partial commitment - Low risk - Best efforts
Best efforts
Changes in the value of bond indexes can be used by bond traders to evaluate __________ of investing in bonds of different types and maturities - Changes in the attractiveness - The potential future return - The potential capital growth - The potential future risk
Changes in the attractiveness
The coupon interest paid periodically on a bond is calculated as the product of the _______ and the _______ of the bond - Yield to maturity; face value - Coupon rate; face value - Coupon rate; market price - Yield to maturity; market price
Coupon rate; face value
While Treasury bills are sold on a _______ basis, Treasury notes and bonds pay _______ interest - Discount; compound - Single payment; simple - Discount; semiannual coupon - Discount; annual coupon
Discount; semiannual coupon
In most years, the currency in which the largest amount of fixed rate debt is issued is the - Dollar - Euro - Yen - Pound
Dollar
In most years, the currency in which the largest amount of fixed rate debt is issued is the - Yen - Euro - Pound - Dollar
Dollar
True or false: Yield changes of bond market securities were uncorrelated over the period from 1980 through 2019
False
The biggest issuers of both fixed rate and floating rate debt in most years are - International institutions - Financial institutions - Corporations - Governments
Financial institutions
With ________ underwriting, the investment bank guarantees the issuer a price for newly issued bonds by purchasing the entire issue at a fixed price - Firm commitment - Partial commitment - Best efforts - Low risk
Firm commitment
The three major bond rating agencies are - Flourish & Blotts - Fitch Rating - Moody's - Borgin & Burkes - Standard & Poor's (S&P)
Fitch Ratings, Moody's, Standard & Poor's (S&P)
Globally, there is far more _______ debt than ______ debt issued - Fixed rate; floating rate - Short-term; long-term - Floating rate; fixed rate - Public sector; corporate
Fixed rate; floating rate
Two types of municipal bonds exist: _______ and _______ bonds - General obligation; revenue - General obligation; special dispensation - Revenue; coupon - General obligation; special obligation
General obligation; revenue
Municipal bonds backed by the full faith and credit of the issuer are called ______ bonds. Governments usually rely on ______ to make payments on these bonds - Credit enhanced; tax collections - General obligation; tax collections - Revenue; project revenue - Insured; fines and fees
General obligations; tax collections
Treasury STRIPS are created by and sold to investors through - The Federal Reserve Bank of New York - Commercial banks - Savings banks - Government securities brokers and dealers
Government securities brokers and dealers
The major purchasers of bond market securities (investors) are - Governments - Households - Foreign investors - Non-profits - Corporations
Governments, households, foreign investors, corporations
Unlike Treasury bills, Treasury notes and bonds are subject to _______ risk and _______ - Interest rate risk; liquidity risk - Exchange rate risk; liquidity risk - Default risk; interest rate risk - Default risk; liquidity risk
Interest rate risk; liquidity risk
With best efforts underwriting, the _______ assumes the risk that the entire bond issue might not be sold - Issuing firm - Government - Bond investors - Underwriter
Issuing firm
Bond insurance increases the ______ of bonds by making it easier to sell them on the secondary market - Yield to maturity - Coupon rate - Liquidity - Principal
Liquidity
Eurobonds are ______ bonds issued and sold outside of _______ - Long-term; the country of their currency - Short-term; Europe - Short-term; the country of their currency - Long-term; Europe
Long-term; the country of their currency
The price of a STRIP security is the ________ of the face value of the STRIP discounted using the _________ and ________ - Present value; discount rate; semiannual compounding - Present value; discount rate; annual compounding - Present value; yield to maturity; annual compounding - Present value; yield to maturity; semiannual compounding
Present value; yield to maturity; semiannual compounding
Bonds that are issued to finance a specific revenue-generating project and whose payments are made from those revenues are called _______ bonds - Highway - General obligation - Special coupon - Revenue
Revenue
Debenture holders generally receive their promised payments only after all ________ debt holders have been paid - Secured - Commercial paper - Short-term - Unsecured
Secured
The source of funds for repayment of municipal bonds is _______ or _______ - Tax receipts; library late fees - Tax receipts; tariffs and fees - Tax receipts; project revenues - Project revenues; tariffs and fees
Tax receipts; project revenues
Because general obligation bonds rely upon tax revenues for repayment, ______ is usually required - Insurance - Taxpayer approval - A special tax levy - Federal Reserve approval
Taxpayer approval
Most corporate bonds are ______ bonds, meaning that the entire issue matures on a single date - Registered - Bearer - Term - Serial
Term
Treasury STRIPS allow investors to match their ______ with the ______ of the STRIP security - Time preference for funds; maturity date - Financial needs; face value - Time preference for funds; payment amount - Investment horizon; face value
Time preference for funds; maturity date
With firm commitment underwriting, the _______ assumes the risk that the entire bond issue might not be sold - Issuing firm - Bond investors - Underwriter - Government
Underwriter
Each STRIP security must be valued as a ________ with maturity determined by its original _______ - Annual coupon bond; payment date - Zero-coupon bond; issue date - Zero-coupon bond; payment date - Semiannual coupon bond; payment date
Zero-coupon bond; payment date