FIN 331 Exam 2: Chapter 7

What is the coupon rate on a bond that has a par value of $1,000, a market value of $1,100, and a coupon interest payment $100 per year?

10%

How is a conventional bond different from a zero coupon bond?

1: Conventional bonds can sell at par, at a discount from par, or at a premium over par while zeroes can not 2: A conventional bond pays periodic interest while zeroes make no interest payments

What are features of municipal bonds?

1: They are issued by state and local governments 2: The interest on municipal bonds is exempt from federal taxes

How is a zero coupon bond different from a conventional bond?

1: Zero coupon bonds are always issued at a discount 2: Zero coupon bonds make no interest payments

What are municipal bonds?

Bonds that have been issued by state or local governments

The federal government can raise money from financial markets to finance its deficits by _____.

issuing bonds