Question 1

Treasury securities that are pure discount bonds with original maturities ranging from a few days to 26 weeks are called:

Accepted Answer

A) TIPS. 
B) Treasury bonds. 
C) Treasury notes. 
D) Treasury bills. 
A) TIPS. 
B) Treasury bonds. 
C) Treasury notes. 
D) Treasury bills.

Question 2

You own a bond with a face value of $1000 and a conversion ratio of 45.The conversion price is closest to:

Accepted Answer

A) $18. 
B) $22. 
C) $45. 
D) $1000. 
A) $18. 
B) $22. 
C) $45. 
D) $1000.

Question 3

Use the information for the question(s)below.
KT Enterprises has just issued a callable (at par)fifteen-year,7% coupon bond with semiannual coupon payments.The bond can be called at par in five years or anytime thereafter on a coupon payment date.It has a current price of 101.
-What is the Yield to Call (YTC)on this bond?

Accepted Answer

N = 10 (5 × 2)
PMT = 35 ($70/2

Question 4

Asset securitization is the process of creating a(n):

Accepted Answer

A) collateralized security. 
B) asset-backed security. 
C) municipal security. 
D) payment security. 
A) collateralized security. 
B) asset-backed security. 
C) municipal security. 
D) payment security.

Question 5

Use the information for the question(s)below.
Luther Industries has just issued a callable (at 102)ten-year,8% coupon bond with semiannual coupon payments.The bond can be called at 102 in three years or anytime thereafter on a coupon payment date.It has a current price of 99.
-What is the Yield to Call (YTC)on this bond?

Accepted Answer

N = 6 (3 × 2)
PMT = 40 ($80/2)

Question 6

What kind of corporate debt must be secured by real property?

Accepted Answer

A) Mortgage bonds 
B) Notes 
C) Asset-backed bonds 
D) Debentures 
A) Mortgage bonds 
B) Notes 
C) Asset-backed bonds 
D) Debentures

Question 7

Which of the following does NOT issue asset-backed securities?

Accepted Answer

A) Government National Mortgage Association 
B) Federal National Mortgage Association 
C) Student Loan Marketing Association 
D) Federal Reserve 
A) Government National Mortgage Association 
B) Federal National Mortgage Association 
C) Student Loan Marketing Association 
D) Federal Reserve

Question 8

Which of the following statements regarding callable bonds is FALSE?

Accepted Answer

A) The holder of a callable bond faces reinvestment risk precisely when it hurts: when market rates are lower than the coupon rate she is currently receiving. 
B) When yields have risen,the issuer will not choose to exercise the call on the callable bond. 
C) The issuer will exercise the call option only when the prevailing market rate exceeds the coupon rate of the bond. 
D) A callable bond is relatively less attractive to the bondholder than the identical non-callable bond. 
A) The holder of a callable bond faces reinvestment risk precisely when it hurts: when market rates are lower than the coupon rate she is currently receiving. 
B) When yields have risen,the issuer will not choose to exercise the call on the callable bond. 
C) The issuer will exercise the call option only when the prevailing market rate exceeds the coupon rate of the bond. 
D) A callable bond is relatively less attractive to the bondholder than the identical non-callable bond.

Question 9

A(n)________ cash flows come from the cash flows of underlying financial securities.

Accepted Answer

A) general obligation security's 
B) revenue bond's 
C) asset-backed security's 
D) double-barreled bond's 
A) general obligation security's 
B) revenue bond's 
C) asset-backed security's 
D) double-barreled bond's

Question 10

Which of the following statements is FALSE?

Accepted Answer

A) Zero-coupon Treasury securities with maturities longer than one year also trade in the bond market. 
B) Treasury securities are initially sold to the public through dealers. 
C) Municipal bonds ("munis")are issued by state and local governments. 
D) Municipal bonds' distinguishing characteristic is that the income on municipal bonds is not taxable at the federal level. 
A) Zero-coupon Treasury securities with maturities longer than one year also trade in the bond market. 
B) Treasury securities are initially sold to the public through dealers. 
C) Municipal bonds ("munis")are issued by state and local governments. 
D) Municipal bonds' distinguishing characteristic is that the income on municipal bonds is not taxable at the federal level.

Question 11

What kind of corporate debt has a maturity of less than 10 years?

Accepted Answer

A) Asset-backed bonds 
B) Debentures 
C) Notes 
D) Mortgage bonds 
A) Asset-backed bonds 
B) Debentures 
C) Notes 
D) Mortgage bonds

Question 12

Treasury securities that are semiannual coupon bonds with original maturities of between 1 and 10 years are called:

Accepted Answer

A) Treasury bonds. 
B) Treasury bills. 
C) Treasury notes. 
D) TIPS. 
A) Treasury bonds. 
B) Treasury bills. 
C) Treasury notes. 
D) TIPS.

Question 13

In January 2010,the U.S.Treasury issued a $1000 par,ten-year,inflation-indexed note with a coupon of 4%.On the date of issue,the consumer price index (CPI)was 200.By January 2020,the CPI had increased to 300.The principal payment that is made in January 2020 is closest to:

Accepted Answer

A) $1000. 
B) $1020. 
C) $1030. 
D) $1500. 
A) $1000. 
B) $1020. 
C) $1030. 
D) $1500.

Question 14

Bonds issued by a foreign company in a local market,intended for local investors,and denominated in the local currency are known as:

Accepted Answer

A) domestic bonds. 
B) Yankee bonds. 
C) Eurobonds. 
D) foreign bonds. 
A) domestic bonds. 
B) Yankee bonds. 
C) Eurobonds. 
D) foreign bonds.

Exam 24: Debt Financing

Treasury securities that are pure discount bonds with original maturities ranging from a few days to 26 weeks are called:

You own a bond with a face value of $1000 and a conversion ratio of 45.The conversion price is closest to:

Asset securitization is the process of creating a(n):

What kind of corporate debt must be secured by real property?

Which of the following does NOT issue asset-backed securities?

Which of the following statements regarding callable bonds is FALSE?

A(n)________ cash flows come from the cash flows of underlying financial securities.

Which of the following statements is FALSE?

What kind of corporate debt has a maturity of less than 10 years?

Treasury securities that are semiannual coupon bonds with original maturities of between 1 and 10 years are called:

In January 2010,the U.S.Treasury issued a $1000 par,ten-year,inflation-indexed note with a coupon of 4%.On the date of issue,the consumer price index (CPI)was 200.By January 2020,the CPI had increased to 300.The principal payment that is made in January 2020 is closest to:

Bonds issued by a foreign company in a local market,intended for local investors,and denominated in the local currency are known as:

The Corporation

Introduction to Financial Statement Analysis

Financial Decision Making and the Law of One Price

The Time Value of Money

Interest Rates

Valuing Bonds

Investment Decision Rules

Fundamentals of Capital Budgeting

Valuing Stocks

Capital Markets and the Pricing of Risk

Optimal Portfolio Choice and the Capital Asset Pricing Model

Estimating the Cost of Capital

Investor Behavior and Capital Market Efficiency

Capital Structure in a Perfect Market

Debt and Taxes

Financial Distress,managerial Incentives,and Information

Payout Policy

Capital Budgeting and Valuation With Leverage

Valuation and Financial Modeling: a Case Study

Financial Options

Option Valuation

Real Options

Raising Equity Capital

Leasing

Working Capital Management

Short-Term Financial Planning

Mergers and Acquisitions

Corporate Governance

Risk Management

International Corporate Finance

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