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Exam 12: Investing in Bonds

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Question 51

Multiple Choice

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Generally, interest on corporate bonds is paid every

A) six months.
B) three months.
C) month.
D) nine months.
E) year.

F) A) and E)
G) A) and B)

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Question 52

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The trustee is an independent firm that acts as the bondholders' representative.

A) True
B) False

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Question 53

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Corporate bonds are a form of equity financing that does not have to be repaid.

Assume that you purchased a $1,000 Mobil Corporation bond that pays 8.25 percent interest. What is the amount of interest you would receive each six months?

A collateral trust bond is secured by a pledge of securities and is oft en issued by companies that do not own many fixed assets but do own other securities.

If overall interest rates in the economy raise, then a corporate bond with a fixed interest rate will decrease in value.

When a bond is selling for less than its face value, it is said to be selling at a:

A bond with a price quotation of 100 sells for $100.

A bond issued with detachable coupons that the bondholder must present to a paying agent or the issuer in order to receive interest payments is called a __________ bond.

A $l, 000 corporate bond is convertible to 50 shares of the corporation's common stock. What is the minimum price that the stock must obtain before bondholders would consider converting a bond to the company's common stock?

The bond debenture is a legal document that details all of the conditions relating to a bond issue.

Justin Parkinson purchased a bond at a price far below its face value, makes no interest payments, and will be redeemed at its face value at maturity. In all likelihood, he purchased a(n) ____________ bond.

In reality, there is no guarantee that convertible bondholders will convert to common stock even if the price of the common stock does increase.

If a bond is purchased at a price above the face value, the yield to maturity is:

A corporate bond is a corporation's written pledge that it will repay a specified amount of money with interest.

Collateral trust bonds are secured, through a pledge of real property.

A bond that is in the owner's name by the issuing company is called a ____________ bond.

Interest payments for registered bonds are mailed directly to the bondholder of record.

When a bond is selling for more than its face value, it is said to be selling at a:

The only way an investor can make money on a bond investment is to hold the bond until maturity.