The market value of a corporate bond with a fixed interest

Question

Question 1: If an investment objective is considered to be intermediate term, then this means the goal should be achieved in what time frame?

• Less than 2 years
• Over 10 years
• More than 5 years
• In 1-5 years
• None of the above

Question 2: If an investment objective is considered to be long term, then this means the goal should be achieved in what time frame?

• Less than 2 years
• In 2-5 years
• More than 5 years
• Less than 1 year
• None of the above

Question 3: You currently hold a $1,000 corporate bond; however, if interest rates in the overall economy increase, which of the following is most likely to be the market value of this bond?

• $900
• $1,100
• $1,000
• The value of the bond will not change.
• It is impossible to determine whether the bond's value will increase or decrease.

Question 4: The market value of a corporate bond with a fixed interest rate will _____ if interest rates in the overall economy decrease.

• increase
• not change
• decrease
• become worthless
• It is impossible to determine whether the bond's value will increase or decrease.

Question 5: Mary Ann recently received a $20,000 gift from her uncle and is considering investing in stocks, because she knows that historically they have earned an approximately 10-12% rate of return over the last few years. Referring to aspects of investing, Mary Ann is most concerned about which of the following?

• Risk
• Return
• Diversification
• Liquidity
• Income

Question 6: A $1,000 corporate bond pays 6.5% a year. What is the annual interest you will receive?

• $0.65
• $6.50
• $65.00
• $1,060.50
• $1,065.00

Question 7: Investments can be affected by all of the following risks except

• inflation.
• global risks.
• individual selection.
• business failure.
• market risks.

Question 8: Tracey Hernandez is 26 and has saved enough money for an emergency fund, along with an additional $4,500 for an investment program. She is single with no dependents and has a desire to retire at 65. What would best characterize Ms. Hernandez's investment goal?

• Beta
• Income
• Growth
• Risk
• Liquidity

Question 9: Matt Dannon just bought the stock of a company that provides him with the responsibility to approve major company actions. Which one of the following best characterizes this responsibility?

• Voting rights
• Proxy
• Equity
• Dividends
• None of the above

Question 10: Beverly Frickel purchased 100 shares of Gleason Systems stock for $32.50 per share. Her commission for this purchase was $25. She sold the stock 2 years later for $45 per share and a commission of $40. While she held the stock it paid a dividend of $1.50 per share. What was Beverly's total dollar return on this stock?

• $1,355
• $1,335
• $65
• $1,375
• $1,400

Question 11: Lindsey Holt owns stock in the Galloway Gems Company. She knows she will receive a $1.50 dividend each quarter. Given this, you know for sure that she purchased which type of stock?

• Preferred
• Common
• Blue chip
• Growth
• Penny

Question 12: Common stock represents _____.

• a loan to a company
• corporate ownership
• a loan to an investor
• a guarantee of dividends
• a cash distribution

Question 13: You have purchased preferred stock that can be exchanged for common stock at your option. What kind of stock is this?

• Convertible
• Participating
• Cumulative
• Callable
• None of the above

 

Question 14: Assume that you purchased a $1,000 Exxon bond that pays 8.5% interest. What is the amount of interest you would receive every 6 months?

• $42.50
• $8.50
• $85
• $4.25
• $1,000

 

Question 15: What is the approximate market value for a $1,000 corporate bond that pays 7% interest when comparable bonds are paying 8% interest?

• $800
• $875
• $70
• $1,142
• $1,000

Question 16: Which of the statements below is false?

• Stock is a form of equity capital.
• Stock does not have a maturity date.
• Bonds are a form of debt capital.
• Bonds do not have to be repaid at maturity.
• Interest payments are made to bondholders.

 

Question 17: A _____ bond is unsecured and gives bondholders a claim secondary to that of other designated bondholders with respect to both income and assets.

• subordinated debenture
• mortgage
• debenture
• preemptive
• Treasury

 

Question 18: A(n) _____ bond is one that can be exchanged, at the owner's option, for a specified number of shares of the corporation's stock.

• debenture
• convertible
• indenture
• flexible
• subordinated

 

Question 19: A(n) _____ fund is a fund to which annual or semiannual deposits are made for the purpose of redeeming a bond issue.

• serial
• indenture
• debenture
• sinking
• money

 

Question 20: A _____ bond is registered in the owner's name by the issuing company.

• certified
• coupon
• general obligation
• zero-coupon
• registered