FIN 350 Week 5 Quiz – Strayer
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Week 5 Quiz 4 Chapter 7 and 8
Chapter
7—Bond Markets
1. ____
require the owner to clip coupons attached to the bonds and send them to the
issuer to receive coupon payments.
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a.
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Bearer
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b.
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Registered
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c.
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Treasury
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d.
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Corporate
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2. The
yield to maturity is the annualized discount rate that equates the future
coupon and principal payments to the initial proceeds received from the bond
offering.
a.
True
b.
False
3. Note
maturities are usually ____, while bond maturities are ____.
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a.
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less than 10 years; 10 years or more
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b.
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10 years or more; less than 10 years
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c.
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less than 5 years; 5 years or more
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d.
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5 years or more; less than 5 years
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4. Investors
in Treasury notes and bonds receive ____ interest payments from the Treasury.
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a.
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annual
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b.
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semiannual
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c.
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quarterly
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d.
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monthly
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5. The
Treasury has relied heavily on ____-year bonds to finance the U.S. budget
deficit.
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a.
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50
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b.
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70
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c.
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10
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d.
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5
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6. Interest
earned from Treasury bonds is
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a.
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exempt from all income tax.
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b.
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exempt from federal income tax.
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c.
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exempt from state and local taxes.
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d.
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subject to all income taxes.
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7. Treasury
bond auctions are normally conducted only at the beginning of each year.
a.
True
b.
False
8. ____
bids for Treasury bonds specify a price that the bidder is willing to pay and a
dollar amount of securities to be purchased.
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a.
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Competitive
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b.
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Noncompetitive
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c.
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Negotiable
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d.
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Non-negotiable
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9. Treasury
bond dealers
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a.
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quote an ask price for customers who want to sell existing
Treasury bonds to the dealers.
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b.
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profit from a very wide spread between bid and ask
prices in the Treasury securities market.
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c.
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may trade Treasury bonds among themselves.
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d.
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make a primary market for Treasury bonds.
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10. Under
the STRIP program created by the Treasury, stripped securities are created and
sold by the Treasury.
a.
True
b.
False
11. A
ten-year, inflation-indexed bond has a par value of $10,000 and a coupon rate
of 5 percent. During the first six months since the bond was issued, the
inflation rate was 2 percent. Based on this information, the coupon payment
after six months will be $____.
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a.
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250
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b.
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255
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c.
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500
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d.
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510
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12. Bonds
issued by ____ are backed by the federal government.
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a.
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the Treasury
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b.
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AAA-rated corporations
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c.
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state governments
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d.
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city governments
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13. Municipal
general obligation bonds are ____. Municipal revenue bonds are ____.
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a.
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supported by the municipal government's ability to
tax; supported by the municipal government's ability to tax
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b.
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supported by the municipal government's ability to
tax; supported by revenue generated from the project
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c.
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always subject to federal taxes; always exempt
from state and local taxes
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d.
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typically zero-coupon bonds; typically zero-coupon
bonds
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14. In
general, variable-rate municipal bonds are desirable to investors who expect
that interest rates will ____.
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a.
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remain unchanged
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b.
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fall
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c.
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rise
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d.
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none of the above
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15. Which
of the following statements is not true regarding zero-coupon bonds?
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a.
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They are issued at a deep discount from par value.
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b.
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Investors are taxed on the total amount of
interest earned at maturity.
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c.
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The issuing firm is permitted to deduct the
amortized discount as interest expense for federal income tax purposes, even
though it does not pay interest until maturity.
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d.
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Zero-coupon bonds are purchased mainly for
tax-exempt investment accounts, such as pension funds and individual
retirement accounts.
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e.
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All of the above are true.
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