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Exam 12: Investing in Bonds

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Question 51

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

A) True
B) False

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Question 52

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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) C) and D)
G) A) and E)

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Question 53

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

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.

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?

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.

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.

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

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

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

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?

When a bond is selling for more 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.

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

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

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

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

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