1) The difference between the price and the par value of a zero-coupon bond represents ________.
A) taxes payable by the bond buyer
B) the accumulated principal over the life of the bond
C) the bond premium
D) the accumulated interest over the life of the bond
2) When the ________ is less than the yield to maturity, the bond sells at a/the ________ the par value.
A) coupon rate, premium over
B) coupon rate, discount to
C) time to maturity, discount to
D) time to maturity, same price as
3) Which of the following types of bonds may the issuer buy back before maturity?
A) Callable bond
B) Putable bond
C) Convertible bond
D) Zero-coupon bond
4) Stocks differ from bonds because:
A) bond cash flows are known while stock cash flows are uncertain.
B) firms pay bond cash flows prior to paying taxes while stock cash flows are after tax.
C) the ending par value of a bond is known at purchase while the ending value of a share of stock is unknown at purchase.
D) of all of the above.
5) Which of the following statements is TRUE?
A) The dealers of stock are not allowed to make money on the difference between what they buy the stock for and what they sell it for.
B) A bear market is a prolonged rising market, one in which stock prices in general are increasing.
C) The ask price is the price at which a dealer is willing to sell, and the bid price is the price at which a dealer is willing to buy.
D) A bull market is a prolonged declining market, one in which stock prices in general are decreasing.