Question 1

Interest and capital gains on municipal bonds are tax-exempt by the IRS.

Accepted Answer

A) True 
 B)False

Question 2

While Treasury bonds and bills are quoted on the basis of price,Treasury notes are quoted on the basis of yield.

Accepted Answer

A) True 
 B)False

Question 3

Which of the following is NOT a characteristic of preferred stock as an investment?

Accepted Answer

A) Preferred stockholders are entitled to receive their dividend prior to payment of dividends to common stockholders 
B) Preferred stock dividends are taxed at the capital gains rate for individual investors 
C) Preferred stock dividends may be omitted by the corporation under certain circumstances 
D) It is a hybrid security of common stock and debt 
A) Preferred stockholders are entitled to receive their dividend prior to payment of dividends to common stockholders 
B) Preferred stock dividends are taxed at the capital gains rate for individual investors 
C) Preferred stock dividends may be omitted by the corporation under certain circumstances 
D) It is a hybrid security of common stock and debt

Question 4

If an investor is in the 33% marginal tax bracket and can purchase a municipal bond paying 7.5%,what would the equivalent before-tax return from a corporate bond have to be to equate the two returns on a before-tax basis?

Accepted Answer

The answer of If an investor is in the 33%...

Question 5

In many respects,the bond market appears to demonstrate a high degree of rationality of risk and return.

Accepted Answer

A) True 
 B)False

Question 6

Corporate bonds generally trade in units of:

Accepted Answer

A) $100. 
B) $1,000. 
C) $5,000. 
D) $10,000. 
A) $100. 
B) $1,000. 
C) $5,000. 
D) $10,000.

Question 7

A legal document which is administered by an independent trustee and spells out the major provisions of a bond agreement is called the

Accepted Answer

A) bond contract. 
B) bond indenture. 
C) debenture. 
D) bond subordination. 
A) bond contract. 
B) bond indenture. 
C) debenture. 
D) bond subordination.

Question 8

Junk bonds normally provide:

Accepted Answer

A) a higher yield than Treasury bonds. 
B) a lower yield than Treasury bonds. 
C) a lower yield than AA corporate bonds. 
D) More than one of the above is true 
A) a higher yield than Treasury bonds. 
B) a lower yield than Treasury bonds. 
C) a lower yield than AA corporate bonds. 
D) More than one of the above is true

Question 9

The most important feature of municipal bonds is:

Accepted Answer

A) the wide range of denominations and maturities. 
B) that the interest is not taxable by the federal government. 
C) the risk-free nature of this investment. 
D) its appeal to investors needing growth. 
A) the wide range of denominations and maturities. 
B) that the interest is not taxable by the federal government. 
C) the risk-free nature of this investment. 
D) its appeal to investors needing growth.

Question 10

A secured corporate bond is referred to as a debenture.

Accepted Answer

A) True 
 B)False

Question 11

An important feature of the GNMA (GinnieMae)pass-through certificate is that there is no principal balance at maturity.

Accepted Answer

A) True 
 B)False

Question 12

Assume a $1,000 Treasury bill is quoted to pay 6% interest over a three-month period.How much interest would the investor receive?

Accepted Answer

A) $10 
B) $15 
C) $20 
D) $30 
E) $60 
A) $10 
B) $15 
C) $20 
D) $30 
E) $60

Question 13

A sinking fund may be used to pay off a perpetual bond.

Accepted Answer

A) True 
 B)False

Question 14

If inflation is higher than that expected at time of issue,inflation-indexed Treasury securities:

Accepted Answer

A) provide a lower return than fixed-income securities. 
B) provide a higher return than fixed-income securities. 
C) do not adequately compensate the investor for loss of purchasing power. 
D) may be called in by the government. 
A) provide a lower return than fixed-income securities. 
B) provide a higher return than fixed-income securities. 
C) do not adequately compensate the investor for loss of purchasing power. 
D) may be called in by the government.

Question 15

Inflation-indexed Treasury securities provide returns through:

Accepted Answer

A) interest payments,plus a conversion privilege. 
B) interest payments,plus an increase in value due to inflation. 
C) tax-exempt interest payments. 
D) cumulative interest payments. 
A) interest payments,plus a conversion privilege. 
B) interest payments,plus an increase in value due to inflation. 
C) tax-exempt interest payments. 
D) cumulative interest payments.

Question 16

An after-acquired clause requires that new property must be placed under the original mortgage.

Accepted Answer

A) True 
 B)False

Question 17

There is customarily a small spread between bid and asked prices of Treasury notes and bonds,because:

Accepted Answer

A) they are traded at a discount from par. 
B) there is competition from other markets. 
C) the market for Treasury issues is liquid. 
D) there are not many government securities dealers. 
A) they are traded at a discount from par. 
B) there is competition from other markets. 
C) the market for Treasury issues is liquid. 
D) there are not many government securities dealers.

Question 18

Income bonds are highly favored by corporations,because they provide the benefits of tax-deductible interest payments,without the contractual obligations of most debt instruments.

Accepted Answer

A) True 
 B)False

Question 19

The difference between a general obligation and a revenue bond is:

Accepted Answer

A) the general obligation bond is backed by the full faith,credit,and "taxing power" of the governmental unit. 
B) that for a revenue bond,the repayment of the issue is fully dependent on the revenue-generating capability of a specific project or venture. 
C) that general obligation bonds are usually of high quality because of the taxing power behind most of them. 
D) All of the above 
A) the general obligation bond is backed by the full faith,credit,and "taxing power" of the governmental unit. 
B) that for a revenue bond,the repayment of the issue is fully dependent on the revenue-generating capability of a specific project or venture. 
C) that general obligation bonds are usually of high quality because of the taxing power behind most of them. 
D) All of the above

Question 20

Which of the following statements about U.S.Treasury securities is true?

Accepted Answer

A) The interest earned on Treasury bills is fully taxable by states 
B) All Treasury securities are considered to be risk-free 
C) The maturities of Treasury bills,notes,and bonds tend to be different 
D) More than one of the above is true 
A) The interest earned on Treasury bills is fully taxable by states 
B) All Treasury securities are considered to be risk-free 
C) The maturities of Treasury bills,notes,and bonds tend to be different 
D) More than one of the above is true

Exam 10: Bond and Fixed-Income Fundamentals

Interest and capital gains on municipal bonds are tax-exempt by the IRS.

While Treasury bonds and bills are quoted on the basis of price,Treasury notes are quoted on the basis of yield.

Which of the following is NOT a characteristic of preferred stock as an investment?

If an investor is in the 33% marginal tax bracket and can purchase a municipal bond paying 7.5%,what would the equivalent before-tax return from a corporate bond have to be to equate the two returns on a before-tax basis?

In many respects,the bond market appears to demonstrate a high degree of rationality of risk and return.

Corporate bonds generally trade in units of:

A legal document which is administered by an independent trustee and spells out the major provisions of a bond agreement is called the

Junk bonds normally provide:

The most important feature of municipal bonds is:

A secured corporate bond is referred to as a debenture.

An important feature of the GNMA (GinnieMae)pass-through certificate is that there is no principal balance at maturity.

Assume a $1,000 Treasury bill is quoted to pay 6% interest over a three-month period.How much interest would the investor receive?

A sinking fund may be used to pay off a perpetual bond.

If inflation is higher than that expected at time of issue,inflation-indexed Treasury securities:

Inflation-indexed Treasury securities provide returns through:

An after-acquired clause requires that new property must be placed under the original mortgage.

There is customarily a small spread between bid and asked prices of Treasury notes and bonds,because:

Income bonds are highly favored by corporations,because they provide the benefits of tax-deductible interest payments,without the contractual obligations of most debt instruments.

The difference between a general obligation and a revenue bond is:

Which of the following statements about U.S.Treasury securities is true?

The Investment Setting

Security Markets

Participating in the Market

Investment Companies: Mutual Funds, exchange-Traded Funds, closed-End Funds, and Unit Investment Trusts

Economic Activity

Industry Analysis

Financial Statement Analysis

Efficient Markets and Anomalies

Behavioral Finance and Technical Analysis

Principles of Bond Valuation and Investment

Convertible Securities and Warrants

Commodities and Financial Futures

Stock Index Futures and Options

A Basic Look at Portfolio Management and Capital Market Theory

Duration and Bond Portfolio Management

International Securities Markets

Investments in Real Assets

Alternative Investments: Private Equity and Hedge Funds

Measuring Risks and Returns of Portfolio Managers

a Comprehensive Analysis for Real Estate Investment Decisions

the Makeup of Institutional Investors

Filters