Question 1

Bonds backed by real property are&#10;A) convertible bonds&#10;B) collateralized bonds&#10;C) debenture bonds&#10;D) mortgage bonds.

Accepted Answer

Mortgage bonds are backed by real property as collateral, providing security to bondholders.

Question 2

A contract that gives the holder the right to purchase a designated security such as common stock or bonds of the issuer anytime up to a future date at a price set today is called a&#10;A) convertible.&#10;B) restrictive covenant.&#10;C) warrant.&#10;D) sinking fund.

Accepted Answer

A warrant is a financial instrument that gives the holder the right to purchase a company's stock or bonds at a specific price before a certain date. It is similar to an option but typically issued by the company itself and can have a longer term to expiration.

Question 3

Bonds that pay no coupon and sell at a discount are called&#10;A) convertible bonds.&#10;B) debenture bonds.&#10;C) interest free bonds.&#10;D) zero coupon bonds.

Accepted Answer

convertible bonds.&#10;

Question 4

Information found in the bond indenture would include all of the following except&#10;A) call provisions..&#10;B) convertibility provisions.&#10;C) maturity provisions.&#10;D) sinking fund provisions.

Accepted Answer

Maturity provisions, which detail when the bond will mature and the principal must be repaid, are a fundamental aspect of any bond and would be included in the bond indenture, not excluded. The bond indenture typically includes call provisions, convertibility provisions, and sinking fund provisions, among other details.

Question 5

The over the counter market is&#10;A) a loosely connected array of brokers and dealers who buy and sell securities in the secondary market.&#10;B) the market to buy and sell securities in the secondary market.&#10;C) assigns credit ratings&#10;D) none of the above.

Accepted Answer

The over-the-counter (OTC) market is indeed a network of brokers and dealers who trade securities directly among themselves rather than through a centralized exchange, primarily in the secondary market.

Question 6

Collateral bonds are&#10;A) bonds issued by corporations backed by financial assets.&#10;B) bonds issued by corporations backed by the general credit worthiness of the issuer..&#10;C) bonds issued by state and municipal government backed by the taxes collected by government..&#10;D) bonds issued by the Treasury backed by the federal government..

Accepted Answer

Collateral bonds are issued by corporations and are backed by financial assets that serve as collateral. This means if the issuer defaults, the bondholders have a claim on the collateral assets.

Question 7

General obligation bonds are&#10;A) issued by corporations and considered a general obligation of the issuer.&#10;B) issued by state and municipal governments and considered a general obligation of the issuer.&#10;C) are guaranteed by an insurance company that promises to pay the holder in the event of default by the issuer.&#10;D) are issued by private enterprises that were publicly chartered by Congress to reduce the cost of borrowing to some sectors of the economy.

Accepted Answer

General obligation bonds are issued by state and municipal governments and are backed by the full faith and credit of the issuer, meaning they are considered a general obligation of the issuer. This means that the government entity is obligated to repay the debt with general revenues, including taxes.

Question 8

Congress chartered private enterprises called _____________ to issue government agency securities to reduce the cost of borrowing to certain sectors of the economy.&#10;A) government-sponsored enterprises&#10;B) federal Reserve Banks&#10;C) primary dealers&#10;D) securities dealers

Accepted Answer

Government-sponsored enterprises (GSEs) are financial services corporations created by Congress to enhance the flow of credit to specific sectors of the economy, such as housing, agriculture, and education. They achieve this by issuing their own securities and using the proceeds to provide financing to these sectors, thereby reducing the cost of borrowing.

Question 9

_____________________are considered default-free securities.&#10;A) Treasury securities&#10;B) Municipal bonds&#10;C) Revenue bonds&#10;D) Mortgage bonds

Accepted Answer

Treasury securities are considered default-free because they are backed by the full faith and credit of the U.S. government, which has the power to tax and print money to ensure it meets its obligations.

Question 10

Any bond denominated in a currency other than the currency of the country it is sold in is called a&#10;A) Euroloan.&#10;B) Eurobond.&#10;C) foreign bond.&#10;D) mortgage bond.

Accepted Answer

Eurobonds are bonds issued in a currency other than the currency of the country or market in which they are issued. They are a popular way for issuers to raise capital in a foreign currency.

Question 11

Any bond denominated in the local currency issued by a foreign corporation is called a&#10;A) Euroloan.&#10;B) Eurobond.&#10;C) foreign bond.&#10;D) mortgage bond.

Accepted Answer

The answer of Any bond denominated in the local currency...

Deck 6: The Corporate and Government Bond Markets