Personal Finance Chapter 18

When a bond issuer cannot meet the interest and/or principal payments, what has occurred?

bond default

The amount a bondholder will be paid at maturity is called

face value

A bond's current yield is computed by dividing the bond's interest rate by its closing value.

false

Another name for a secured bond is a convertible bond.

false

Both the interest rate and the market price of a bond are fixed.

false

Corporate bonds are usually sold in units of $100, making them very attractive for individual investors.

false

Interest received on a corporate bond is not taxable.

false

People who own corporate bonds receive interest payments every month.

false

Typically, a bond fund contains only investment-grade bonds.

false

A revenue bond is a type of municipal bond that

finances public-works projects such as airports and hospitals

One main distinction between stocks and bonds is that

unlike stock dividends, a bond's interest does not go up and down.

You can buy up to $100,000 worth of U.S. savings bonds each year.

false

Junk bonds have higher yields than investment-grade bonds.

true

Most corporate, municipal, and agency bonds are purchased on the primary market, also known as the new issue market.

true

Municipal bonds generally pay a lower interest rate than corporate bonds.

true

The interest rate is the main factor that affects bond prices.

true

Today, most bonds are registered.

true

Which of the following types of bonds cannot be purchased through TreasuryDirect?

corporate bonds

A type of corporate bond based on the general creditworthiness of the company is called a(n)

debenture

An investment-grade bond

is considered the highest-quality, lowest-risk bond.

Corporations usually agree not to call bonds for the first ___ years after issuance.

5

When bonds sell for more than their face value, they are selling at a

premium

Bond prices

tend to remain steadier than stock prices

Bond maturities typically range from 1 to 30 years.

true

Bonds often appreciate in value, especially when interest rates are dropping.

true