PF Chapter 11

Line of__________ is a short-term loan that is approved before money is actually needed

Blank 1: credit

A person may prefer bonds over stocks because the bond __________ payments are guaranteed.

Blank 1: interest or coupon

Treasury inflation-protected securities pays interest every _________ months at a fixed rate.

Blank 1: six or 6

The risk associated with bad news that a company may bring to the public is the risk that the investment will decrease in ____________.

Blank 1: value or worth

Among other factors, a person's priorities, age, and personal _________affect his or her investment goals.

Blank 1: values, goals, or income

Which of the following has the shortest maturity?

T-bills

Municipal bonds are used to finance which of the following?

*Toll roads *Schools *Airports

For Standard & Poor's the bond ratings generally range from:

AAA to D

Treasury ____________ have a maturity of 4 to 52 weeks.

Blank 1: bills

Treasury bonds have a slightly ____________ interest rate than T-notes or T-bills.

Blank 1: higher, bigger, greater, larger, or high

Inflation is the rise in the general level of: __________

Blank 1: prices

Which of the following is NOT true about bonds?

*Bonds are often recommended over bond funds for small investors

Which of the following are advantages of purchasing securities issued by the U.S. Treasury?

*Safe investment *Backed by the government *Decreased risk of default

Which of the following investments are included in a diversified portfolio?

*Small company stocks *Large company stocks *Cash *Bonds

Three ways that the Internet can help you invest in bonds are:

*research information online *lower commission with online trades *price information

The maturity on a Treasury bond is:

30 years.

Tom has invested in TIPS. In the past year, the inflation rate was 4 percent. Tom earns

4 percent on his investment.

Bonds that are judged to be of the best quality would have which rating?

AAA or Aaa

__________in an investment means minimal risk of loss, while __________ in an investment means a measure of uncertainty about an outcome.

Blank 1: Safety Blank 2: risk

Useful investment goals are________ and ____________.

Blank 1: specific or specified Blank 2: measurable, quantifiable, calculable, computable, or assessable

Which of the following statements is not a factor to consider in choosing different investments?

If you invest in high quality stocks, there is no need to monitor your investments.

The advantage for an investor to trade bonds through an online broker is discounted commissions on trades.

TRUE

When looking at investment you should first ask yourself:

what is important to you and what do you value?

A price quote of 79 on a bond means:

79 percent of face value.

The U.S. treasury is an example of a:

federal agency publications with information on bonds

Maturity for Treasury notes ranges from two years to:

ten years.

Which of the following is NOT a factor to consider when choosing different investments?

Tax consequence of selling investments

Which of the following is NOT true regarding callable bonds?

The bonds are redeemed early at the option of the bondholder

One type of risk that investors in stock take is a decrease in:

value

A(n) ___________ fund is an amount of money you can obtain quickly in case of an immediate need.

Blank 1: emergency

Interest for Treasury notes is slightly ________ than T-Bills since investors must wait longer to get their money back.

Blank 1: higher, bigger, larger, greater, or more

The sale of bonds can ______________ a corporation's financial leverage.

Blank 1: improve

A corporate bond is a corporation's written pledge to repay a specified amount of money along with

Blank 1: interest or coupons

U.S. Treasury securities are a very low-risk investment that many investors use to allocate their investments and bring their overall risk down. Because of this low risk, they also offer a low __________ rate.

Blank 1: interest, return, or growth

Bond quotations are given as a ___________ of face value.

Blank 1: percentage, %, or percent

Government and corporate bonds are often seen as __________investments than stocks.

Blank 1: safer

A(n) ___________ fund is a fund to which annual or semiannual deposits are made for the purpose of redeeming a bond issue.

Blank 1: sinking

A municipal bond is a debt security issued by a _________ or local ________.

Blank 1: state Blank 2: government

Municipal bonds are used to finance ongoing activities of the ________ and ________ governments.

Blank 1: state Blank 2: local

A general obligation bond is a bond backed by the full faith, credit, and unlimited___________ power of the government that issued it.

Blank 1: taxing, tax, or taxation

The ____________ is the percentage rate of return earned by an investor who holds a bond for a stated period of time.

Blank 1: yield

With a lower risk of a bond and the possible high return of a stock, investors may choose which investment option?

Convertible bonds

Which of the following ratings is the lowest according to Standard and Poor's?

D

Which of the following is not true about the time value of money affecting investments?

Many investors today seek higher returns by investing in certificates of deposit

Which of the following is NOT true?

Many people in today's economy choose CD's because of their high rates of return

A corporation's written pledge to repay a specified amount of money with interest is called a:

corporate bond.

A bond that is backed only by the reputation of the issuing corporation is called a:

debenture

A municipal government bond backed by the full faith, credit, and unlimited taxing power of the government that issued it is called:

general obligation bond

A short-term loan that is approved before the money is actually needed is a(n):

line of credit

The ability to buy or sell an investment quickly without substantially affecting the investments value is called:

liquidity

A corporate bond secured by various assets of the issuing firm is called a:

mortgage bond

A debt security issued by a state or local government is called a:

municipal bond

For Treasury securities, most investors are willing to accept the interest rate determined at auction so they are using:

noncompetitive bids.

A bond that is repaid from the income generated by the project it is designed to finance is called a:

revenue bond

A fund to which annual or semiannual deposits are made for the purpose of redeeming a bond issue is a:

sinking fund.

A high-risk investment made in the hope of earning a relatively large profit in a short time is called a: ___________

speculative investment

Mutual funds are not included in the list of typical investments because:

they invest in the assets on the list

A typical bond transaction would not include:

advice and information from your discount broker

A feature that allows the corporation to call in or buy outstanding bonds from current bondholders before the maturity date is a

call feature

A bond that can be exchanged, at the owner's option, for a specified number of shares of the corporation's common stock is called a:

convertible bond

A mortgage bond is a corporate bond secured by various ____________ of the issuing ___________.

Blank 1: assets Blank 2: firm, company, or corporation

A call feature allows the corporation to buy outstanding bonds from current bondholders__________the_____________ date.

Blank 1: before or by Blank 2: maturity

One advantage of selling bonds is that the use of __________ funds can be used to increase the corporation's _____________ on investment.

Blank 1: borrowed Blank 2: return

A ___________ bond is a bond that can be exchanged, at the owner's option, for a specified number of shares of the corporation's common ___________.

Blank 1: convertible Blank 2: stock

A(n) ____________ is a bond that is backed only by the reputation of the issuing corporation.

Blank 1: debenture

Investors may choose a convertible bond because it has the higher risk of a corporate bond but they can also take advantage of the speculative nature of common stock.

FALSE