Exam 10: Bond and Fixed-Income Fundamentals

The demand side of the bond market is dominated by

The IRS taxes zero-coupon bonds as if interest were paid annually,even though no cash flow is received until maturity.

A strong incentive to a corporation to meet preferred stock dividend payments is provided by the ___________ feature of some preferred stocks.

A call feature may be valuable to:

Changes in the market rate of interest are reflected in the semiannual interest payments of a variable rate note,while the price remains stable.

Money market funds represent a vehicle to buy short-term fixed-income securities through a mutual fund arrangement.

The dollar volume of new corporate debt issues has exceeded the dollar volume of new corporate equity issues for many years.

Treasury strips provide return through:

Corporate bonds carry a higher yield than government issues,and are fully taxable for federal,state,and local purposes.

While the stock market has an active secondary market,the bond market consists primarily of investors who buy and hold bond issues to maturity.

A corporation must generally pay taxes on only 30% of the dividends (preferred or common)that it receives from another corporation.

Like the stock market,there is a strong secondary market for bond issues,particularly corporate and municipal bonds.

Yankee bonds are issued by foreign governments,corporations,or are traded in the U.S.and denominated (payable)in U.S.dollars.