54. Bonds can be secured or unsecured. Likewise, bonds can be term or serial bonds. Which is more common?
a. Secured and term.
b. Secured and serial.
c. Unsecured and term.
d. Unsecured and serial.
55. A home loan with fixed monthly payments and the house as collateral most closely represents which of the following bond characteristics?
a. Secured and term.
b. Secured and serial.
c. Unsecured and term.
d. Unsecured and serial.
56. Which of the following is
not
true regarding callable bonds?
a. This feature allows the borrower to repay the bonds before their scheduled maturity date.
b. This feature helps protect the borrower against future decreases in interest rates.
c. Callable bonds benefit the bond investor.
d. A bond can be both callable and convertible.
57. Convertible bonds:
a. Provide potential benefits only to the issuer.
b. Provide potential benefits only to the investor.
c. Provide potential benefits to both the issuer and the investor.
d. Provide no potential benefits.
58. The price of a bond is equal to:
a. The future value of the face amount only.
b. The present value of the interest only.
c. The present value of the face amount plus the present value of the stated interest payments.
d. The future value of the face amount plus the future value of the stated interest payments.
59. A bond issue with a face amount of $500,000 bears interest at the rate of 10%. The current market rate of interest is also 10%. These bonds will sell at a price that is:
a.Equal to $500,000.
b.More than $500,000.
c.Less than $500,000.
d.The answer cannot be determined from the information provided.
60. A bond issue with a face amount of $500,000 bears interest at the rate of 7%. The current market rate of interest is 8%. These bonds will sell at a price that is:
a.Equal to $500,000.
b.More than $500,000.
c.Less than $500,000.
d.The answer cannot be determined from the information provided.
61. A bond issue with a face amount of $500,000 bears interest at the rate of 7%. The current market rate of interest is 6%. These bonds will sell at a price that is:
a.Equal to $500,000.
b.More than $500,000.
c.Less than $500,000.
d.The answer cannot be determined from the information provided.
62. Ordinarily, the proceeds from the sale of a bond issue will be equal to:
a.The face amount of the bond.
b.The total of the face amount plus all interest payments.
c.The present value of the face amount plus the present value of the stream of interest payments.
d.The face amount of the bond plus the present value of the stream of interest payments.
63. A $500,000 bond issue sold for $510,000. Therefore, the bonds:
a.Sold at a premium because the stated interest rate was higher than the market rate.
b.Sold for the $500,000 face amount plus $10,000 of accrued interest.
c.Sold at a discount because the stated interest rate of was higher than the market rate.
d.Sold at a premium because the market interest rate was higher than the stated rate.