Bonds issued by state and county governments are called

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Reference no: EM131510163

1. A graph depicting the linear relationship of the Yield to Maturity (%) of bonds and the Maturity (years) of bonds is called a(n):

a) Coupon rate b) Yield curve c) Interest rate trend d) Inversion

2  Normally, the YTM on long-term bonds is less than the YTM on short-term bonds.

a) True b) False

3. The contractual and unchanging interest rate paid on a bond is called:

a) The Yield to Maturity b) The Coupon rate c) The Market rate d) The EAR

4. Bonds issued by State and County governments are called:

a) Treasury Notes b) Tax-Free Bonds c) Municipal Bonds d) Corporate Bonds

5. Which of these types of bonds would be issued at the lowest price, assuming they all have the same par value and are issued on the same date?

a) “Plain Vanilla” bond b) Original Issue Discount Bond c) 0-Coupon bond

6. You own several bonds in a portfolio that includes corporate, U.S. Treasury, and Municipal bonds. If market interest rates were to decrease, then the value of your portfolio would:

a) Increase b) Decrease c) Remain the same

7. You have calculated the present value of a lump sum to be received in ‘t’ years using a discount rate of r. If the compounding period were to be quarterly rather than annual, you would have to modify your calculation by:

a) multiplying r x 4, dividing t / 4 b) multiplying t x 4, dividing r / 4 c) multiplying both t and r by 4 d) dividing both t and r by 4

8. The contract that documents all the rights and responsibilities of a bond’s issuer and its bond holders is called a(n):

a) Indenture b) Debenture c) Mortgage d) Prospectus

9. Bond Coupon Payments are equal to (face value x coupon rate)/ payments per year.

a) True b) False

10. The sensitivity of a bond’s value to changes in interest rates is called:

a) Liquidity risk b) Interest Rate risk c) Default risk d) Market Risk

Reference no: EM131510163

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