Question 1

Investors who purchase subordinated debentures usually enjoy higher interest rates than other bondholders because of the increased risk associated with this type of bond.

Accepted Answer

Subordinated debentures are lower in priority in case of default or bankruptcy, making them riskier than other bonds. To compensate for this increased risk, they offer higher interest rates.

Question 2

Discuss why corporations issue bonds, and describe some of the types of bonds issued.

Accepted Answer

The answer of Discuss why corporations issue bonds, and describe...

Question 3

Canada Savings Bonds are available in denominations of $300, $500, $1,000, $5,000, and $10,000.

Accepted Answer

This is true according to the official website of Canada Savings Bonds.

Question 4

You are trying to evaluate two bond issues. One bond issue is rated "A" by the DBRS; the other is rated "B." How important are the bond ratings issued by the DBRS and CBRS? Based on your answer, would you purchase the "A" bond or the "B" bond?

Accepted Answer

The answer of You are trying to evaluate two bond...

Question 5

Define yield to maturity.

Accepted Answer

The answer of Define yield to maturity....

Question 6

A collateral trust bond is secured by a pledge of securities and is oft en issued by companies that do not own many fixed assets but do own other securities.

Accepted Answer

A collateral trust bond is indeed secured by a pledge of securities and is commonly issued by companies that do not have significant fixed assets but do possess other securities that can be pledged as collateral.

Question 7

How do interest rates in the economy affect the price of a corporate bond? Give a numerical example.

Accepted Answer

The answer of How do interest rates in the economy...

Question 8

A registered coupon bond is registered for principal only, not for interest.

Accepted Answer

The answer of A registered coupon bond is registered for...

Question 9

Treasury bills are issued a minimum unit of $1,000 with additional increments of $1,000 above the minimum with terms to maturity of 91, 186, or 364 days

Accepted Answer

Treasury bills can be issued with a minimum unit of $1,000 and additional increments of $1,000 above the minimum. The terms to maturity can be 91, 186, or 364 days.

Question 10

What is the difference between a federal government marketable bond, treasury bill, and Canada Savings Bond?

Accepted Answer

The answer of What is the difference between a federal...

Question 11

If overall interest rates in the economy raise, then a corporate bond with a fixed interest rate will decrease in value.

Accepted Answer

When overall interest rates in the economy raise, newly issued bonds will offer higher interest rates to attract investors, making existing fixed-rate bonds less attractive and their value decreasing.

Quiz 12: Investing in Bonds