Econ M3-1

Municipal bonds

pay interest that is federally tax-free

A deferred call provision

prohibits the bond issuer from redeeming callable bonds prior to a specified date

early bond redemption

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

Call premium

A $1,000 face value bond can be redeemed early at the issuer's discretion for $1,030, plus any accrued interest. The additional $30 is called the:

Maturity

A bond's principal is repaid on the _______ date.

Sukuk

A highly illiquid bond that pays no interest but might entitle its holder to rental income from an asset is most apt to be a:

Coupon

Allison just received the semiannual payment of $35 on a bond she owns. Which term refers to this payment?

Face value

Bert owns a bond that will pay him $45 each year in interest plus $1000 as a principal payment at maturity. What is the $1000 called?

in registered form

Road Hazards has 12-year bonds outstanding. The interest payments on these bonds are sent directly to each of the individual bondholders. These direct payments are a clear indication that the bonds can accurately be defined as being issued:

Spread

The difference between the price that a dealer is willing to pay and the price at which he or she will sell is called the

coupon rate decreases and the time to maturity increases

The price sensitivity of a bond increases in response to a change in the market rate of interest as the:

taxes and default risk

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

The real rate must be less than the normal rate given a positive rate of inflation

Which of the following is correct?

Decreasing the time to maturity increases the price of a discount bond, all else constant

Which one of the following relationships is stated correctly?

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?

Yield to maturity < Coupon Rate

Which one of these equations applies to a bond that currently has a market price that exceeds par value?

A zero coupon bond

has more interest rate risk than a comparable coupon bond