Financial Management--chapter 7

A bond that can be paid off early at the issuer's discretion is referred to as being which one of the following?

callable

A call-protected bond is a bond that:

cannot be called during a certain period of time

Mary just purchased a bond which pays $60 a year in interest. What is the $60 called?

coupon

You want to buy a bond from a dealer. Which one of the following prices will you pay?

asked price

The current yield is defined as the annual interest on bond divided by which one of the following?

market price

A treasury yield curve plots Treasury interest rates relative to which one of the following?

maturity

The specified date on which the principal amount of a bond is payable is referred to as which one of the following?

maturity

interest rates that include an inflation premium are referred to as:

nominal rates

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:

spread

The pure time value of money is known as the:

term structure of interest rates

An indenture is:

the legal agreement between the bond issuer and the bondholders

Which of the following defines a note? I. secured II. unsecured III. maturity less than 10 years IV. maturity in excess of 10 years

II and III

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

bearer form

Which one of the following is the price a dealer will pay to purchase a bond?

bid price

The Leeward Company just issued 15-year, 8%, unsecured bonds at par. These bods fit the definition of which one of the following terms?

debenture

A bond's coupon rate is equal to the annual interest divided by which one of the following?

face value

Bert owns a bond that will pay him $75 each year in interest plus a $1000 principal payment at maturity. What is the $1000 called?

face value

Real rates are defined as nominal rates that have been adjusted for which of the following?

inflation

Currently, the bond market requires a return of 11.6% on the 10-year bonds issued by Winston Industries. The 11.6% is referred to as which one of the following?

yield to maturity

A bond that has only payment, which occurs at maturity, defines which one the following?

zero coupon