Bonds issued with a regular sequence of maturity dates are called which one of the following?

16.    Bonds issued with a regular sequence of maturity dates are called which one of the following?

 

A.     callable bonds

B.     sequential bonds

C.     serial bonds

D.     sinking bonds

E.     put bonds

Answer

serial bonds

 

17.    Which one of the following is an account used to provide for scheduled redemptions of outstanding bonds?

 

A.     redemption fund

B.     sinking fund

C.     liquidation account

D.     serial account

E.     callable account

Answer

sinking fund

 

18.    What are the various provisions within a bond indenture that are designed to protect bondholders by restricting the actions of the issuer called?

 

A.     restrictive actions

B.     prohibitions

C.     negative conditions

D.     protective covenants

E.     restrictive amendments

Answer

protective covenants

 

19.    Which one of the following identifies a new bond issue as being a private placement?

 

A.     The proceeds of the issue are used for a single project.

B.     The issue is marketed through a sole brokerage house.

C.     The issue is sold only to individuals rather than to institutional investors.

D.     The issue is not made available to the public.

E.     The issue names a private individual as the bond trustee.

 

20.    Adjustable-rate bonds are identified by which one of the following characteristics?

 

A.     The coupon rate will increase should the credit rating of the bond decline.

B.     Different bonds within the same issue have different coupon rates.

C.     Bondholders can defer coupon payments at their discretion.

D.     The amount of each coupon payment will depend on the free cash flow of the issuer.

E.     The coupon rate changes in response to changes in current market rates.

 

21.    Which one of the following is an assessment of the credit quality of a bond based on the financial condition of the bond issuer?

 

A.     protective covenant

B.     risk analysis

C.     credit rating

D.     serial report

E.     in-the-money status

 

22.    What are the restrictions on investment portfolios that require that all securities held within the portfolio meet a specified level of safety called?

 

A.     protective covenants

B.     negative restrictions

C.     prudent investment guidelines

D.     safety monitors

E.     risk ranges

 

23.    Bonds with relatively high coupons due to their speculative credit ratings are called which one of the following?

 

A.     investment-grade bonds

B.     high-yield bonds

C.     prudent risk bonds

D.     floating-rate bonds

E.     covenant bonds

 

24.    Which of the following are common characteristics associated with corporate bonds?

I. specified cash flows

II. equity ownership

III. call feature

IV. set maturity date

 

A.     I and II only

B.     I and IV only

C.     II and III only

D.     I, II, and IV only

E.     I, III, and IV only

 

25.    Which one of the following parties is the largest holder of U.S. corporate bonds?

 

A.     pension funds

B.     life insurance companies

C.     banks

D.     foreign investors

E.     individual investors

 

26.    Which one of the following features of corporate bonds has the greatest appeal to pension fund investors?

 

A.     call provision

B.     convertible provision

C.     zero repayment risk

D.     prospectus availability

E.     predictable cash flows

 

27.    A pension fund purchases bonds so that the payments from the bonds provide sufficient cash inflow in a timely manner to offset the cash outflows from the pension fund. What is this investment strategy called?

 

A.     cash flow matching

B.     cash diversification

C.     cash stabilization

D.     in-out investing

E.     plain vanilla matching

 

28.    Which of the following features would you expect a plain vanilla bond to have?

I. semi-annual coupon payments

II. $1,000 face value

III. stated maturity date

IV. multiple bonds within one issue

 

A.     I and II only

B.     II and III only

C.     II, III, and IV only

D.     I, II, and III only

E.     I, II, III, and IV

 

29.    The entire formal contract between a bond issuer and the bondholders is found in which one of the following documents?

 

A.     prospectus

B.     prospectus summary

C.     indenture agreement

D.     indenture summary

E.     trust certificate

 

30.    Which one of the following statements related to callable bonds is correct?

 

A.    Callable bonds are issued at the call price.

B.     Callable bonds can be called at any time.

C.     Callable bonds are generally called at the market price at the time of the call.

D.     Callable bonds are more apt to be called if market interest rates decline.

E.     Callable bonds are generally priced higher than comparable noncallable bonds.

 

                                        

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