Unit 2

par value of the debenture is

$1,000

The minimum face amount of a negotiable certificate of deposit (CD) is typically

$100,000

Types of Debt Securities Issued at a Discount:

1.Zero-Coupon Bonds 2.Treasury Bills (T-bills) 3.Commercial Paper

which one is traded in the U.S. bond market and subject to U.S. Securities and Exchange Commission (SEC) regulations. A. Brady Bond B. Yankee Bond

B

An investor is considering the purchase of $100,000 maturity value of zero-coupon AAA rated corporate bonds scheduled to mature in 20 years. Which of these are among the risks that this investor will be assuming? Default risk Interest rate risk Prepayment risk Reinvestment risk A) II and III B) I and IV C) I and II D) III and IV

C) I and II

Prepayment risk is only associated with

mortgage-backed securities

The price of the Treasury bond is 102.20 means

since Treasury bond in 32nds, That means that 102.20 is 102 and 20/32 which is 102 5/8

Convertible debt securities are more sensitive to A. the price of the underlying common stock B. interest rates.

B. interest rates.

____are issued only by foreign governments, usually—but not always—are U.S. dollar-denominated, and are available for purchase in the United States.

Brady bonds

A respected analyst reports that last week's T-bill rate at 6% is lower than the rate for the preceding week and lower than the average for the past month. Which of the following is true? A) Investors are paying less for T-bills. B) Stock prices are rising. C) Investors are paying more for T-bills. D) The general level of interest rates is increasing.

C

What bond is U.S. dollar-denominated and is issued in the United States

Yankee bond

A U.S. dollar-denominated bond that is sold outside the United States and the issuer's country but for which the principal and interest are stated and paid in U.S. dollars is best described as

Eurodollar Bond