Ch 6 Fin, Ch 7 Fin, CH 8 Fin, Chapter 11

A 6 percent bond has a yield to maturity of 6.5 percent. The bond matures in 7 years, has a face value of $1,000, and pays semiannual interest payments. What is the amount of each coupon payment? A. $30.00 B. $32.50 C. $60.00 D. $62.50 E. $65.00

A. $30.00

AB Builders, Inc. has 12-year bonds outstanding with a face value of $1,000 and a market price of $974. The bonds pay interest annually and have a yield to maturity of 4.03 percent. What is the coupon rate? A. 3.75 percent B. 4.20 percent C. 4.25 percent D. 7.50 percent E. 8.40 percent

A. 3.75 percent

Best Lodging has $1,000 face value bonds outstanding. These bonds pay interest semiannually, mature in 5 years, and have a 6 percent coupon. The current price is quoted at 101. What is the yield to maturity? A. 5.77 percent B. 5.84 percent C. 6.00 percent D. 6.13 percent E. 6.27 percent

A. 5.77 percent

Which one of the following terms denotes for certain that a bond is unsecured? A. Debenture B. Bearer form C. Call provision D. Sinking fund E. Blanket mortgage

A. Debenture

Which one of the following is the price that an investor pays to purchase an outstanding bond? A. Dirty price B. Face value C. Call price D. Bid price E. Clean price

A. Dirty price

A real rate of return is defined as a rate that has been adjusted for which one of the following? A. Inflation B. Interest rate risk C. Taxes D. Liquidity E. Default risk

A. Inflation

Which one of the following is the rate of return an investor earns on a bond before adjusting for inflation? A. Nominal rate B. Real rate C. Dirty rate D. Coupon rate E. Clean rate

A. Nominal rate

75. Which one of the following bonds is most apt to have the smallest liquidity premium? A. Treasury bill B. Corporate bond issued by a new firm C. Municipal bond issued by the State of New York D. Municipal bond issued by a rural city in Alaska E. Corporate bond issued by General Motors (GM)

A. Treasury bill

The price at which an investor can purchase a bond from a dealer is called the _____ price. A. asked B. coupon C. call D. face E. bid

A. asked

The written agreement that contains the specific details related to a bond issue is called the bond: A. indenture. B. debenture. C. document. D. registration statement. E. issue paper.

A. indenture.

A note is: A. unsecured debt that is generally payable within the next ten years. B. a formal type of loan that is secured by real estate. C. long-term debt secured by part, or all, of the assets of the borrower. D. debt that is secured by a borrower's accounts receivables. E. the written agreement which details the information relative to a bond issue.

A. unsecured debt that is generally payable within the next ten years.

A bond has a par value of $1,000, a current yield of 7.606 percent, and semi-annual interest payments. The bond quote is 98.6. What is the amount of each coupon payment? A. $32.50 B. $37.50 C. $38.03 D. $72.31 E. $75.00

B. $37.50

Global Trade, Inc. has $1,000 face value bonds outstanding with a market price of $1,013. The bonds pay interest annually, mature in 11 years, and have a yield to maturity of 5.34 percent. What is the current yield? A. 5.39 percent B. 5.43 percent C. 5.50 percent D. 5.61 percent E. 5.77 percent

B. 5.43 percent

In relation to bonds, which one of the following terms has the same meaning as the term "crossover"? A. Speculative B. 5B C. Fallen angel D. Junk E. Triple A

B. 5B

The 6 percent coupon bonds of Precision Engineering are selling for 98 percent of par value. The bonds mature in 8 years and pay interest semiannually. These bonds have current yield of _____ percent, a yield to maturity of _____ percent, and an effective annual yield of _____ percent. A. 6.12; 6.32; 6.36 B. 6.12; 6.32; 6.42 C. 6.12; 6.36; 6.42 D. 6.23; 6.32; 6.36 E. 6.23; 6.36; 6.42

B. 6.12; 6.32; 6.42

The 7 percent annual coupon bonds of TPO, Inc. are selling for $1,021. The bonds have a face value of $1,000 and mature in 6.5 years. What is the yield to maturity? A. 6.42 percent B. 6.59 percent C. 6.63 percent D. 6.68 percent E. 6.70 percent

B. 6.59 percent

A bond has a $1,000 face value, a market price of $1,036, and pays interest payments of $70 every year. What is the coupon rate? A. 6.76 percent B. 7.00 percent C. 7.12 percent D. 13.51 percent E. 14.00 percent

B. 7.00 percent

The 8 percent, $1,000 face value bonds of Glenmore Foods are currently selling at $1,027. These bonds have 16 years left until maturity. What is the current yield? A. 7.71 percent B. 7.79 percent C. 8.00 percent D. 8.23 percent E. 8.28 percent

B. 7.79 percent

Which one of the following refers to the relationship between nominal returns, real returns, and inflation? A. Call premium B. Fisher effect C. Conversion ratio D. Bid-ask spread E. Clean-dirty spread

B. Fisher effect

Which of the following characteristics are most commonly associated with corporate bonds issued in the U.S.? I. registered form II. bearer form III. quarterly coupon payments IV. semiannual coupon payments A. I and III only B. I and IV only C. II and III only D. II and IV only E. III only

B. I and IV only

Which one of the following terms refers to a bond's rate of return that is required by the market place? A. Coupon rate B. Yield to maturity C. Dirty yield D. Call yield E. Discount rate

B. Yield to maturity

The value of a bond is dependent upon the: A. coupon rate and the current yield. B. coupon rate and the yield to maturity. C. current yield and the yield to maturity. D. coupon rate but neither the current yield nor the yield to maturity. E. yield to maturity but neither the current yield nor the coupon rate.

B. coupon rate and the yield to maturity.

When a bond's yield to maturity is less than the bond's coupon rate, the bond: A. had to be recently issued. B. is selling at a premium. C. has reached its maturity date. D. is priced at par. E. is selling at a discount.

B. is selling at a premium.

Suppose that a small, rural city in the countryside of North Dakota plans to issue $150,000 worth of 10- year bonds. Which one of the following components of the bond's yield will be affected by the fact that no active secondary market is expected for these bonds? A. real rate B. liquidity premium C. interest rate risk premium D. inflation premium E. taxability premium

B. liquidity premium

Generally speaking, bonds issued in the U.S. pay interest on a(n) _____ basis. A. annual B. semi-annual C. quarterly D. monthly E. daily

B. semi-annual

Red Mountain, Inc. bonds have a face value of $1,000. The bonds carry a 7 percent coupon, pay interest semiannually, and mature in 13.5 years. What is the current price of these bonds if the yield to maturity is 6.82 percent? A. $989.50 B. $994.56 C. $1,015.72 D. $1,018.27 E. $1,020.00

C. $1,015.72

A 5.5 percent $1,000 bond matures in 7 years, pays interest semiannually, and has a yield to maturity of 6.23 percent. What is the current market price of the bond? A. $945.08 B. $947.21 C. $959.09 D. $959.60 E. $962.40

C. $959.09

Kurt's Forest Products is currently issuing both 5-year and 10-year bonds at par. The bonds each pay 6.5 percent annual interest and have face values of $1,000. You decide to purchase one of each of these bonds. Assume the yield to maturity on each of these bonds is 7.4 percent one year from now. Given this, you will realize _____ percent price depreciation on the 5-year bond and _____ percent price depreciation on the 10-year bond. A. 3.02; 3.39 B. 3.02; 4.08 C. 3.02; 5.77 D. 3.39; 4.08 E. 3.39; 5.77

C. 3.02; 5.77

One year ago, Alpha Supply issued 15-year bonds at par. The bonds have a coupon rate of 6.5 percent and pay interest annually. Today, the market rate of interest on these bonds is 7.2 percent. How does the price of these bonds today compare to the issue price? A. 4.99 percent lower B. 5.38 percent lower C. 6.05 percent lower D. 0.07 percent higher E. 1.36 percent higher

C. 6.05 percent lower

A corporate bond pays 8.5 percent interest. You are in the 15 percent tax bracket. What is your after-tax yield on this bond? A. 1.28 percent B. 2.23 percent C. 7.23 percent D. 8.35 percent E. 9.78 percent

C. 7.23 percent

The Road House would like to issue some semiannual coupon bonds at par. Comparable bonds have a current yield of 8.16 percent, an effective annual yield of 8.68 percent, and a yield to maturity of 8.50 percent. What coupon rate should The Road House set on its bonds? A. 8.00 percent B. 8.16 percent C. 8.50 percent D. 8.68 percent E. 9.00 percent

C. 8.50 percent

A bond has a yield to maturity of 9.38 percent, a 7.5 percent annual coupon, a $1,000 face value, and a maturity date 21 years from today. What is the current yield? A. 7.91 percent B. 8.47 percent C. 9.04 percent D. 9.38 percent E. 9.46 percent

C. 9.04 percent

You own two bonds. Both bonds pay annual interest, have 6 percent annual coupons, $1,000 face values, and currently have 6 percent yields to maturity. Bond A has 12 years to maturity and Bond B has 4 years to maturity. If the market rate of interest rises unexpectedly to 7 percent, Bond _____ will be the most volatile with a price decrease of _____ percent. A. A; 5.73 B. A; 6.08 C. A; 7.94 D. B; 3.39 E. B; 4.51

C. A; 7.94

43. Which one of the following statements is correct? A. Bonds are generally called at par value. B. A current list of all bondholders is maintained whenever a firm issues bearer bonds. C. An indenture is a contract between a bond's issuer and its holders. D. Collateralized bonds are called debentures. E. A bondholder has the right to determine when his or her bond is called.

C. An indenture is a contract between a bond's issuer and its holders.

Which one of the following types of bonds permits its issuer to forego paying interest payments if certain natural events cause significant losses? A. PETS B. PUT C. CAT D. PINES E. LIBOR

C. CAT

Which one of the following is a unique characteristic of an income bond? A. Interest income is tax-free B. Interest income is paid at the time of issuance C. Coupon payments are dependent upon the issuer's income D. Coupon payments are paid on a regular monthly basis E. Coupon payments can be converted into equity shares

C. Coupon payments are dependent upon the issuer's income

Which one of the following terms applies to a junk bond that was originally issued with a bond rating of AA? A. Debenture B. Covenant C. Fallen angel D. Sinking E. Triple B

C. Fallen angel

Which of the following ratings indicate that a bond is low-quality? I. Baa II. BB III. B IV. Ba A. II only B. II and III only C. II, III, and IV only D. I, II, and III only E. I, II, III, and IV

C. II, III, and IV only

Changes in interest rates affect bond prices. Which one of the following compensates bond investors for this risk? A. Taxability risk premium B. Default risk premium C. Interest rate risk premium D. Real rate of return E. Bond premium

C. Interest rate risk premium

What is the primary purpose of bond covenants? A. Meet regulatory requirements B. Describe repayment terms C. Lender protection D. Define a bond's rating E. Increase a bond's seniority position

C. Lender protection

Which one of the following might be included in a bond's list of negative covenants? A. Maintaining a current ratio of 1.2 or more B. Maintaining a minimum cash balance of $1.2 million C. Limiting cash dividends to $1 per share or less D. Maintaining a times interest earned ratio of 2 or more E. Providing audited financial statements in a timely manner

C. Limiting cash dividends to $1 per share or less

Which one of the following provides compensation to a bondholder when a bond is not readily marketable at its full value? A. Interest rate risk premium B. Inflation premium C. Liquidity premium D. Taxability premium E. Default risk premium

C. Liquidity premium

Which one of the following terms applies to a bond that initially sells at a deep discount and pays no interest payments? A. Callable B. Income C. Zero coupon D. Convertible E. Tax-free

C. Zero coupon

A bond trader just purchased and resold a bond. The amount of profit earned by the trader from this purchase and resale is referred to as the: A. market yield. B. yield-to-call. C. bid-ask spread. D. current yield. E. bond premium.

C. bid-ask spread.

The annual interest divided by the face value of a bond is referred to as the: A. market rate. B. call rate. C. coupon rate. D. current yield. E. yield-to-maturity.

C. coupon rate.

Miller Farm Products is issuing a 15-year, unsecured bond. Based on this information, you know that this debt can be described as a: A. note. B. bearer form bond. C. debenture. D. registered form bond. E. call protected bond.

C. debenture.

If intermediate-term, default-free, pure discount bonds have a higher rate of return than either the comparable shorter-term or longer-term bonds, the term structure of interest rates will be: A. upward-sloping. B. flat. C. humped. D. downward-sloping. E. double-humped.

C. humped.

The yield to maturity on a discount bond is: A. equal to both the coupon rate and the current yield. B. is equal to the current yield but greater than the coupon rate. C. is greater than both the current yield and the coupon rate. D. is less than the current yield but greater than the coupon rate. E. is less than both the current yield and the coupon rate.

C. is greater than both the current yield and the coupon rate.

The Treasury yield curve plots the yields on Treasury notes and bonds relative to the ____ of those securities. A. face value B. market price C. maturity D. coupon rate E. issue date

C. maturity

A callable bond: A. is generally call protected during the entire term of the bond issue. B. generally will have a call protection period during the final three years prior to maturity. C. may be structured to pay bondholders the current value of the bond on the date of call. D. is prohibited from having a sinking fund also. E. is frequently called at a price that is less than par value.

C. may be structured to pay bondholders the current value of the bond on the date of call.

A registered form bond is defined as a bond that: A. is a bearer bond. B. is held in street name. C. pays coupon payments directly to the owner of record. D. is listed with the Securities Exchange Commission (SEC). E. is unsecured.

C. pays coupon payments directly to the owner of record.

The primary purpose of protective covenants is to help: A. reduce interest rate risk. B. the issuer in case of default. C. protect bondholders from issuer actions. D. bondholders whose bonds are called. E. convert bearer bonds into registered form.

C. protect bondholders from issuer actions.

A $1,000 face value bond currently has a yield to maturity of 6.69 percent. The bond matures in 3 years and pays interest annually. The coupon rate is 7 percent. What is the current price of this bond? A. $948.01 B. $949.60 C. $1,005.26 D. $1,008.18 E. $1,010.13

D. $1,008.18

One year ago, you purchased a 7.5 percent annual coupon bond for a clean price of $980. The bond now has 7 years remaining until maturity. Today, the yield to maturity on this bond is 6.87 percent. How does today's clean price of this bond compare to your purchase price? A. 4.24 percent lower B. 4.70 percent lower C. 5.48 percent lower D. 5.52 percent higher E. 6.61 percent higher

D. 5.52 percent higher

A bond has a 7 percent coupon rate, a face value of $1,000, semiannual payments, and sells at par. The current yield is _____ percent and the effective annual yield is _____ percent. A. 6.76; 6.87 B. 6.76; 6.96 C. 7.00; 7.00 D. 7.00; 7.12 E. 7.23; 7.23

D. 7.00; 7.12

Which one of the following bonds is the least sensitive to changes in market interest rates? A. Zero-coupon, 10 year B. 6 percent annual coupon, 10 year C. Zero-coupon, 4 year D. 8 percent annual coupon, 4 year E. 6 percent annual coupon, 4 year

D. 8 percent annual coupon, 4 year

A 6-year, semiannual coupon bond is selling for $991.38. The bond has a face value of $1,000 and a yield to maturity of 9.19 percent. What is the coupon rate? A. 4.50 percent B. 4.60 percent C. 6.00 percent D. 9.00 percent E. 9.19 percent

D. 9.00 percent

When you refer to a bond's coupon, you are referring to which one of the following? A. Difference between the purchase price and the face value B. Annual interest divided by the current bond price C. Difference between the bid and ask price D. Annual interest payment E. Principal amount of the bond

D. Annual interest payment

This morning, Jeff found a bond certificate lying on the floor of a bank. He picked it up and noticed that the bond matured today. He presented the bond to the bank teller and received both the principal and interest payment. The bond that Jeff found must have been which one of the following? A. Debenture B. Note C. Registered form bond D. Bearer form bond E. Callable bond

D. Bearer form bond

Which one of the following statements is correct? A. Bond markets have less daily trading volume than equity markets. B. There are less bond issues than there are equity issues. C. Municipal bond prices are highly transparent. D. Bond markets are dealer based. E. Most bond trades occur on the NYSE.

D. Bond markets are dealer based.

The current yield on a bond is equal to the annual interest divided by which one of the following? A. Issue price B. Maturity value C. Face amount D. Current market price E. Current par value

D. Current market price

Which of the following combinations is assured to decrease the interest rate sensitivity of a bond? A. Increase in both the time to maturity and the coupon rate B. Increase in the time to maturity and a decrease in the coupon rate C. Decrease in both the time to maturity and the coupon rate D. Decrease in the time to maturity and an increase in the coupon rate E. A decrease in the time to maturity and an increase in the face value

D. Decrease in the time to maturity and an increase in the coupon rate

Manning, Inc. originally issued bonds that were rated investment grade. These bonds have now been downgraded to junk status. Which one of the following terms applies to this situation? A. Called bond B. Converted bond C. Protected covenant D. Fallen angel E. Floating bond

D. Fallen angel

The term structure of interest rates is affected by which of the following? I. interest rate risk premium II. real rate of interest III. default risk premium IV. inflation premium A. I and II only B. II and III only C. I, III, and IV only D. I, II, and IV only E. I, II, III, and I

D. I, II, and IV only

Which of the following can generally be found in a bond's indenture agreement? I. terms of repayment II. names of registered shareholders III. protective covenants IV. total amount of the bond issue A. I and III only B. II, III, and IV only C. I, II, and III only D. I, III, and IV only E. I, II, III, and IV

D. I, III, and IV only

On which one of the following dates is the principal amount of a bond repaid? A. Coupon date B. Issue date C. Discount date D. Maturity date E. Face date

D. Maturity date

What term is used to describe an account that a bond trustee manages for the sole purpose of redeeming bonds early? A. Registered account B. Bearer account C. Call account D. Sinking fund E. Premium fund

D. Sinking fund

Which one of the following statements concerning sinking funds is correct? A. Bond issuers must fund a sinking fund at the time the bonds are issued. B. Sinking funds must include at least one "balloon payment". C. Sinking funds must be funded annually, starting on the issue date. D. Sinking funds may be used to purchase bonds in the open market. E. Sinking funds can only be used to call bonds.

D. Sinking funds may be used to purchase bonds in the open market.

Which one of the following premiums is paid on a corporate bond due to its tax status? A. Interest rate risk premium B. Inflation premium C. Liquidity premium D. Taxability premium E. Default risk premium

D. Taxability premium

A bond dealer sells at the _____ price and buys at the _____ price. A. clean; dirty B. dirty; clean C. bid; asked D. asked; bid E. asked; asked

D. asked; bid

The call premium is the amount by which the: A. market price exceeds the par value. B. market price exceeds the call price. C. face value exceeds the market price. D. call price exceeds the par value. E. call price exceeds the market price.

D. call price exceeds the par value.

A bond has a make-whole call provision. Given this, you know that the: A. bond will always sell at par. B. call premium must equal the annual coupon payment. C. call price is directly related to the market rate of interest. D. call price is inversely related to the market rate of interest. E. bond must be a zero-coupon bond.

D. call price is inversely related to the market rate of interest.

Travis recently purchased a callable bond. However, that bond cannot be currently redeemed by the issuer. Thus, the bond must currently be: A. subject to a sinking fund provision. B. a debenture. C. a "fallen angel". D. call protected. E. unrated.

D. call protected.

A bond for which no specific property has been pledged as security is classified as a: A. bearer bond. B. trust deed bond. C. registered bond. D. debenture. E. sinking fund bond.

D. debenture.

Dexter, Inc. has a bond issue outstanding. The issue's indenture provision prohibits the firm from redeeming the bonds during the first three years. This provision is referred to as the _____ provision. A. safeguard B. market C. liquidity D. deferred call E. sinking fund

D. deferred call

If inflation is expected to steadily decrease in the future, the term structure of interest rates will most likely be: A. upward-sloping. B. flat. C. humped. D. downward-sloping. E. double-humped.

D. downward-sloping.

A protective covenant: A. protects the borrower from unscrupulous practices by the lender. B. is designed to protect the bond dealer from potential legal liability related to the bond issue. C. prevents a bond from being called. D. limits the actions of the borrower. E. guarantees that a bond will be repaid in full with interest.

D. limits the actions of the borrower.

What is the price of a $1,000 face value bond if the quoted price is 102.1? A. $102.10 B. $1,002.10 C. $1,020.01 D. $1,020.10 E. $1,021.00

E. $1,021.00

A $1,000 face value bond is currently quoted at 101.2. The bond pays semiannual payments of $27.50 each and matures in 6 years. What is the coupon rate? A. 2.72 percent B. 2.75 percent C. 5.00 percent D. 5.43 percent E. 5.50 percent

E. 5.50 percent

A 12-year, semiannual coupon bond is priced at $1,102.60. The bond has a $1,000 face value and a yield to maturity of 5.33 percent. What is the coupon rate? A. 5.00 percent B. 5.25 percent C. 5.50 percent D. 6.00 percent E. 6.50 percent

E. 6.50 percent

The Hot Dog Shack wants to raise $1.2 million by selling some coupon bonds at par. Comparable bonds in the market have a 6.5 percent annual coupon, 15 years to maturity, and are selling at 97.687 percent of par. What coupon rate should The Hot Dog Shack set on its bonds? A. 6.25 percent B. 6.38 percent C. 6.50 percent D. 6.67 percent E. 6.75 percent

E. 6.75 percent

The $1,000 face value bonds of Jasper International have a 7.5 percent coupon and pay interest annually. Currently, the bonds are quoted at 98.27 and mature in 3.5 years. What is the yield to maturity? A. 6.97 percent B. 7.10 percent C. 7.24 percent D. 7.78 percent E. 8.09 percent

E. 8.09 percent

Which one of the following statements is true? A. The current yield on a par value bond will exceed the bond's yield-to-maturity. B. The yield to maturity on a premium bond exceeds the bond's coupon rate. C. The current yield on a premium bond is equal to the bond's coupon rate. D. A premium bond has a current yield that exceeds the bond's coupon rate. E. A discount bond has a coupon rate that is less than the bond's yield to maturity.

E. A discount bond has a coupon rate that is less than the bond's yield to maturity.

The lowest rating a bond can receive from Moody's and still be classified as an investment-quality bond is: A. BB B. BBB C. B D. Ba E. Baa

E. Baa

Which one of the following is the quoted price of a bond? A. Par value B. Discount price C. Face value D. Dirty price E. Clean price

E. Clean price

Which one of the following represents additional compensation provided to bondholders to offset the possibility that the bond issuer might not pay the interest and/or principal payments as expected? A. Interest rate risk premium B. Inflation premium C. Liquidity premium D. Taxability premium E. Default risk premium

E. Default risk premium

What is the principal amount of a bond that is repaid at the end of the loan term called? A. Coupon B. Market price C. Accrued price D. Dirty price E. Face value

E. Face value

Which one of the following individuals is most apt to purchase a municipal bond? A. Minimum-wage employee B. Retired individual with minimal current income C. Recent college graduate D. Tax-exempt organization E. Highly-compensated business owner

E. Highly-compensated business owner

Which one of the following statements is correct regarding mortgage backed securities (MBSs)? A. There is a separate MBS for each individual mortgage processed by a mortgage broker. B. A MBS is a type of a debenture. C. The originating bank is the seller of MBSs to investors. D. Investors in MBSs are protected from default. E. Investors in MBSs are subject to real estate deflation risk.

E. Investors in MBSs are subject to real estate deflation risk.

The term structure of interest rates represents the relationship between which of the following? A. Nominal rates on risk-free and risky bonds B. Real rates on risk-free and risky bonds C. Nominal and real rates on default-free, pure discount bonds D. Market and coupon rates on default-free, pure discount bonds E. Nominal rates on default-free, pure discount bonds and time to maturity

E. Nominal rates on default-free, pure discount bonds and time to maturity

Which one of the following types of bonds should an investor purchase if he or she is primarily concerned about ensuring that bond ownership will increase his or her purchasing power? A. OTC B. Death C. CAT D. PETS E. TIPS

E. TIPS

A "floater" bond frequently has a: A. flexible deferred call period. B. fixed yield-to-maturity but a flexible coupon payment. C. a government guarantee. D. fixed-dollar obligation. E. a put provision.

E. a put provision.

The price at which a dealer will purchase a bond is called the _____ price. A. asked B. face C. call D. put E. bid

E. bid

The inflation premium: A. increases the real return. B. is inversely related to the time to maturity. C. remains constant over time. D. rewards investors for accepting interest rate risk. E. compensates investors for expected price increases.

E. compensates investors for expected price increases.

An unexpected decrease in market interest rates will cause a: A. coupon bond's current yield to increase. B. zero coupon bond's price to decrease. C. fixed-rate bond's coupon rate to decrease. D. zero-coupon bond's current yield to decrease. E. coupon bond's yield-to-maturity to decrease.

E. coupon bond's yield-to-maturity to decrease.

Zero-coupon bonds: A. are valued using simple interest. B. are only issued by the U.S. Treasury. C. create a tax deduction for the issuer only at maturity. D. are issued at a premium. E. create annual taxable income to individual bondholders.

E. create annual taxable income to individual bondholders.

Municipal bonds are: A. generally purchased by tax-exempt investors. B. risk-free. C. issued by federal, state, and local governmental bodies. D. zero-coupon bonds. E. generally callable.

E. generally callable.

The "R" in the Fisher effect formula represents the: A. current yield. B. real return. C. coupon rate. D. inflation rate. E. nominal return.

E. nominal return.

A call provision grants the bond issuer the: A. right to contact each bondholder to determine if he or she would like to extend the term of his or her bonds. B. option to exchange the bonds for equity securities. C. right to automatically extend the bond's maturity date. D. right to repurchase the bonds on the open market prior to maturity. E. option of repurchasing the bonds prior to maturity at a pre-specified price.

E. option of repurchasing the bonds prior to maturity at a pre-specified price.

An upward-sloping term structure of interest rates indicates: A. the real rate of return is lower for short-term bonds than for long-term bonds. B. there is an indirect relationship between real interest rates and time to maturity. C. there is an indirect relationship between nominal interest rates and time to maturity. D. the nominal rate is declining as the real rate rises as the time to maturity increases. E. the nominal rate is increasing even though the real rate is constant as the time to maturity increases.

E. the nominal rate is increasing even though the real rate is constant as the time to maturity increases.