2019.12.

18 20:20:16 Interest Rate and Bond Valuation

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1. Which of the following is a basic component that affects the slope of the term structure of interest
rates?
A) real rate of interest
B) liquidity premium
C) default risk premium
D) taxability premium
E) inflation premium

2. A/an __________. bond is often putt able and has a “collar.”

A) convertible
B) zero-coupon
C) act of god
D) junk
E) floating rate

3. If investors are uncertain that a corporate bond issuer will make all of the bond payments as
promised, the investors will demand a higher yield in the form of
A) an increased interest rate risk premium
B) an increased real rate of interest
C) an increased inflation premium
D) an increased default risk premium
E) an increased liquidity risk premium

4. Your neighbor is bragging that the coupon payment on the bonds he bought five years ago have
increased in each of the last three years. You know he must own
A) a floating rate bond
B) a LYON
C) a zero coupon bond
D) a put bond
E) a convertible bond

5. The written agreement between the corporation and its bond creditors is called a/an ______
A) security agreement
B) bond
C) indenture
D) contract
E) protective covenant

6. Which of the following would NOT be listed on the face of a bond?

A) The coupon interest rate
B) The coupon payment to be made
C) The name of the issuer
D) The maturity date
E) The market price of the bond

7. The yield to maturity on a semiannual bond is quoted as ______ .

A) a six-month rate
B) an APR
C) a compound rate
D) a current yield
E) an EAR

8. A/an ________ bond is issued without record of the purchaser’s name.

A) bearer
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B) income
C) straight
D) registered
E) unfunded

9. What is the YTM on a 7,50% coupon bond with a $1,000 face value, 11 years left until maturity
and a market price of $709,49?
A) 10,00%
B) 12,50%
C) 12,00%
D) 11,50%
E) 8,50%

10. As a corporate treasurer, you manage a $100 million bond portfolio. Economists suggest (and you
believe) that market interest rates are headed up over the next several months. To reduce interest
rate risk you should attempt to
I. reduce the average maturity of the portfolio by selling long-term bonds and buying short-term bonds
II. lengthen the average maturity of the portfolio by buying long-term bonds and selling short-term
bonds
III. reduce the average coupon rate by selling high-coupon bonds and buying low-coupon bonds
IV. increase the average coupon rate by buying high-coupon bonds and selling low-coupon bonds
A) I and IV only
B) I only
C) I, II, III and IV
D) I and II only
E) II and III only

11. Your firm seeks to obtain a short-term loan from a local bank. The banker quotes you a rate of 9
percent. This is a real rate.
A) True
B) False

12. ______ is the rating given to income bonds on which no interest is being paid.
A) C
B) B
C) Ca
D) D
E) F

13. The term structure of interest rates may be downward sloping if

A) default risk premiums are higher for longer term bonds than for shorter term bonds
B) the real rate of interest is lower this year than it was last year
C) the inflation premium decreases with maturity
D) there are bonds that have an unfavorable tax status
E) the interest rate risk premium is the same for both short and long term bonds

14. _______ is the highest rating given by Moody’s that is NOT considered investment grade.
A) A
B) Ba
C) Baa
D) Caa
E) BB
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15. Which bond would most likely possess the highest degree of interest rate risk?
A) 12% coupon rate, 20 years to maturity
B) 8% coupon rate, 20 years to maturity
C) 10% coupon rate, 20 years to maturity
D) 10% coupon rate, 10 years to maturity
E) 8% coupon rate, 10 years to maturity

16. Which of the following risks do debt ratings specifically attempt to assess?
I. Interest rate risk
II. Default risk
III. The risk of a call being made
A) I only
B) I, II and III
C) II only
D) I and II only
E) II and III only

17. If the required return on a bond does not change from one year to the next, then ______________
over the same period. (Ignore changes in default risk.)
A) the price of a premium bond will rise
B) the price of a bond selling at par will remain unchanged
C) the price of a perpetual bond will rise
D) the price of a convertible bond will rise
E) the price of a discount bond will fall

18. Assume bond X is selling at a premium to par. Then the required return on the bond is less than the
I. current yield
II. yield-to-maturity
III. coupon rate
A) II and III only
B) I, II and III
C) I only
D) I and III only
E) I and II only

19. Which of the following items is/are included in the bond indenture?
I. Call provisions, if any
II. Sinking fund provisions, if any
III. Negative covenants, if any
IV. A description of the property used as security, if any

A) II, III and IV only

B) I and III only
C) I and II only
D) I, II, III and IV
E) I, II and IV only

20. All else equal, interest rate risk is highest for bonds with
I. low coupon rates
II. variable rate coupons
III. long maturities
A) II and III only
B) I and II only
C) I, II and III
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D) I only
E) I and III only

21. The ______________ component of the term structure does not influence the shape of the term
structure, rather it affects the overall level of interest rates.;

A) liquidity premium
B) default risk premium
C) real rate of interest
D) inflation premium
E) interest rate risk premium

22. The ______________ is known as the term structure of interest rates.

A) municipal bond yield curve
B) Fisher effect
C) relationship between short- and long-term interest rates
D) inflation premium
E) interest rate risk premium

23. Suppose you are trying to evaluate a bond. Which of the following is NOT true?
A) Bonds with high coupon payments are generally (all else equal) more sensitive to changes in
interest rates than bonds with lower coupon payments
B) The lower the discount rate, the more valuable the coupon payments are at t=0
C) All else equal, bonds with larger coupon payments will have a higher value at t=0
D) When market interest rates rise, bond prices will fall, all else equal
E) Bonds with long maturities are generally (all else equal) more sensitive to changes in interest
rates than bonds with shorter maturities

24. The Fisher effect illustrates the relationship between real returns, the rate of inflation, and interest
rate risk.
A) False
B) True

25. George bought an investment one year ago and just calculated his return on investment. He found
that his purchasing power has increased by 15% as a result of his investment. If inflation over the
period was 4%, his
A) ability to purchase goods has declined over the past year
B) real return on investment is more than 15%
C) nominal return on investment is less than 11%
D) nominal return on investment is more than 15%
E) real return on investment is equal to 4%

26. Which of the following items does NOT generally appear in a Wall Street Journal corporate bond
quote?
A) yield-to-maturity
B) price
C) change from the closing price for the previous trading day
D) current yield
E) coupon rate

27. Dizzy Corp. has bonds outstanding bearing a coupon rate of 9,00%. The bonds pay coupons
semiannually, have six years remaining to maturity, and are currently priced at $977,53 per bond.
What is the yield to maturity on the bonds?
A) 11,00%
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B) 10,50%
C) 9.50%
D) 11,50%
E) 10,00%

28. For a bond, required return = yield-to-maturity = market rate.

A) True
B) False

29. Which of the following is NOT true?

A) A bond’s yield is typically calculated assuming that all of the promised coupon and principal
payments will be made
B) The compensation investors demand for bearing interest rate risk adds an upward slope to the
term structure of interest rates
C) Investors demand an extra yield on a nontaxable bond as compensation for the unfavorable tax
treatment.
D) The compensation investors demand for buying bonds that don’t trade very often is called a
liquidity premium
E) If the rate of inflation is expected to decline by a small amount, there could still be an upward-
sloping term structure

30. If prices are increasing at a 2% rate, what is the real return on an investment that is purchased for
$60 and sold a year later at $112?
A) 332.03%
B) 41.50%
C) 20.75%
D) 166.01%
E) 83.01%

31. You presently own stock that you purchased one year ago. Your return on the stock for the past
year was 25%. You calculate your real return on investment was 13.63%. The rate of inflation must
be _______
A) 10.0%
B) 25.0%
C) 1.10%
D) 42.0%
E) 3.63%

32. The relationship between nominal returns, real returns, and inflation is described by ___________
A) the term structure
B) the Fisher effect
C) the required rate of return
D) the risk premium
E) a bond’s yield to maturity

33. A bond has a par value of $1,000, has 12 years to maturity, and makes coupon payments of $60
every 12 months. Which of the following is NOT true?
A) At a market rate of 7%, the bond sells at a discount.
B) Since this bond pays annual coupons, its value CANNOT be computed given a market rate that
is compounded semiannually.
C) At a market rate of 6%, the bond sells for par.
D) The coupon rate on the bond is 6%.
E) If the bond sells at par, the coupon rate, yield-to-maturity, and current yield are all equal.
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34. If investors require a 7% nominal return and the expected inflation rate is 3%, what is the expected
real return?
A) 10.21%
B) 4.25%
C) 1.04%
D) 3.88%
E) 3.00%

35. J&J Enterprises wants to issue 20-year, $1,000 face value zero-coupon bonds. If each bond is to
yield 8%, what is the minimum number of bonds J&J must sell if they wish to raise at least 2
million from the issue? (Ignore issuance costs.)
A) 16,159
B) 4,290
C) 9,322
D) 13,880
E) 10,164

36. Your broker offers you the opportunity to purchase a bond with coupon payments of $90 per year
and a face value of $ 1,000. If the yield to maturity on similar bonds is 8%, this bond should
A) sell for the same price as similar bonds regardless of maturity
B) sell at a premium
C) sell at a discount
D) sell for either a premium or a discount but you can’t tell which
E) sell for $1000

37. _____________ is an unsecured obligation of the issuing company.

A) A covenant
B) Dedicated capital
C) A debenture
D) A indenture
E) The deed of trust

38. Suppose you read that a bond with a face value of $1,000 and a coupon of $80 per year has a
current yield of exactly 8%. How many years remain until maturity?
I. Greater than 20 years
II, Greater than 10 years but less than 20
III. Less than 10 years
A) III only
B) I, II, or III may be correct
C) I only
D) Cannot be computed since price is not given
E) II only

39. Returns that have not been adjusted for inflation are called
A) percentage returns
B) taxable returns
C) average returns
D) real returns
E) nominal returns

40. Ignoring default, which of the following is NOT accurate: Prior to maturity,
A) a callable bond can be terminated (called) by the issuer
B) a bond with a sinking bind can be terminated (repaid) by the bond trustee
C) an income bond can be terminated (repaid) by the issuer
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D) a convertible bond can be terminated (converted) by the investor

E) a put bond can be terminated (put) by the investor

41. If a representative product increases in price from $1,973 to $6,818 over the next year, what is the
rate of inflation?
A) 122.80%
B) 245.61%
C) 491.21%
D) 61.40%
E) 982.43%

42. A premium bond is a bond that sells for less than its par value.
A) True
B) False

43. The Whitesell Athletic Corporation’s bonds have a face value of $1,000 and a 10% coupon paid
semiannually until maturity 5 years from now. What is the current yield that would be reported in
the Wall Street Journal if the yield to maturity is 8%?
A) 4.97%
B) 5.11%
C) 4.62%
D) 9.25%
E) 8.83%

44. Which of the following does NOT correctly complete this sentence: In general, bond yields
increase as investors demand compensation for _______ .
A) default risk
B) interest rate risk
C) increases in the real rate of interest
D) increased liquidity
E) increases in expected future inflation

45. If you purchase a bond which is selling at a discount, collect the annual coupon for one year, and
then sell the bond for the same price at which it was purchased, your total return for the year will
A) equal the current yield
B) be less than the coupon rate
C) equal the coupon rate
D) equal the yield to maturity
E) exceed the yield to maturity

46. A bond with a face value of $1,000 has annual coupon payments of $100 and was issued 7 years
ago. The bond currently sells for $1,000 and has 8 years left to maturity. This bond’s
_______________ must be 10%.
I. yield to maturity
II. current yield
III. coupon rate
A) I and II only
B) III only
C) I, II and III
D) II and III only
E) I only

47. You earn a 5,5% real return. If the inflation rate is 6%, what is your nominal return?
A) 11,25%
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B) 11,83%
C) 12,26%
D) 12,56%
E) 12,85%

48. Which of the following is a true statement?

I. All else equal, the value of a perpetual bond will remain unchanged from one year to the next,
unless market interest rates change
II. All else equal, bond prices and coupon rates are inversely related
III. All else equal, given two bonds identical but for coupon, the market price of the lower coupon
bond will change more (in percentage terms) than that of the higher coupon bond for a given
change in market interest rates
A) I and III only
B) I,II and III
C) I only
D) I and II only
E) II and III only

49. If a firm is allowed to miss a coupon payment on a bond in a year in which it reports an operating
loss, the bond is likely a/an __________ bond.
A) callable
B) puttable
C) floating-rate
D) income
E) zero-coupon

50. The call premium typically starts at ten percent of par and decreases to zero with the passage of
time.
A) True
B) False

51. The term structure of interest rates is the relationship between real interest rates on default-free,
pure discount securities and time to maturity.
A) False
B) True

52. If the nominal rate of interest on an investment is 49% and the real rate of return is 9%, what is the
inflation rate?
A) 36.70%
B) 74.89%
C) 17.98%
D) 52.42%
E) 25.69%

53. The component(s) of nominal returns NOT in the Fisher effect equation is (are)
I. the real return on investment
II. the default risk premium
III. the taxability premium
IV. compensation for inflation’s impact on dollars invested
A) I and III only
B) I, II, III and IV
C) II and III only
D) I, III, and IV only
E) II only
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54. J&J Manufacturing just issued a bond with a $1,000 face value and a coupon rate of 11%. If the
bond has a life of 8 years, pays annual coupons, and the yield to maturity is 9%, what will the bond
sell for?
A) $1110,70
B) $1,121.81
C) $1,287.25
D) $1,300.00
E) $1,025.32
55. The market price of a bond is $1,236.94, it has 14 years to maturity, a $1,000 face value, and pays
an annual coupon of$100. What is the yield to maturity?
A) 3.18%
B) 6.11%
C) 4.26%
D) 7.25%
E) 5.37%

56. A corporation undertaking an expansion project issues 20 year bonds to finance the project. Which
of the following is most likely true?
A) The bonds must have sold at a premium since expansion projects are generally risky
B) The company has borrowed money and must pay interest on the amount borrowed
C) If the company could have issued preferred stock they would have
D) The company does not need to make payments on the bonds unless it has positive earnings for
the year
E) The company did not have any outstanding bonds when it issued the new ones

57. What is the yield-to-maturity on a 15-year zero coupon bond selling for 37.5% of face?
A) 37.5%
B) 5.97%
C) 6.76%
D) 4.40%
E) 5.60%

58. D&G Enterprises issues bonds with a $1,000 face value that make coupon payments of $30 every 3
months. What is the coupon rate?
A) 12.00%
B) 30.00%
C) 3.00%
D) 9.00%
E) 0.30%

59. A sinking fund is used to pay off portions of debt each year.
A) True
B) False
60. All else being equal, if interest rates fall, __________________
I. Bond prices will rise
II. coupon payments on floating rate bonds will fall
III. prices on long-term bonds will rise more (on a percentage basis) than prices on short-term
bonds
IV. prices on low coupon bonds will rise more (on a percentage basis) than prices on high coupon
bonds
A) II and IVonly
B) I and IVonly
C) I and III only
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D) I, II, III and IV

E) I, III, and IV only

61. J&J Manufacturing just issued a bond with a $1,000 face value and a coupon rate of 7%. If the
bond has a life of 30 years, pays annual coupons, and the yield to maturity is 6.8%, what is the
present value of the bond’s face value?
A) $1,000.00
B) $241.15
C) $138.95
D) $1,025.32
E) $886.37

62. For a bond selling at par, the yield to maturity must be

A) greater than the current yield
B) greater than the required rate of return
C) less than the coupon rate
D) equal to the current yield
E) greater than the coupon rate

63. If an investor requires a 1% real rate of return on an investment, what will be the nominal rate (R)
with a 19% inflation rate?
A) 80.76%
B) 20.19%
C) 40.38%
D) 5.05%
E) 10.10%

64. Which of the following is NOT a duty of a trust company appointed when bonds are issued?
A) Manage the sinking fund
B) Represent the bondholders in default
C) Make sure terms of the indenture are obeyed
D) Monitor the protective covenants for the bondholders
E) Decide when the bonds should be called

65. A firm intends to take on a significant amount of new debt in order to fund the purchase of a close
competitor. However the firm cannot complete the transaction unless it first calls one of its
outstanding bond issues. It must be true that the called bonds
A) have an inferior tax status than the new bonds will
B) have covenants which restrict such increase in debt
C) are backed by the corporation’s fixed assets
D) have a higher interest rate than the new bonds will
E) can be called at a price that is very near par

66. _________ returns measure the percentage change in one’s purchasing power, not the percentage
change in the number of dollars one has.
A) Real
B) Holding period
C) Purchasing power
D) Yield to maturity
E) Nominal

67. Which of the following is correct? A zero coupon bond _____

A) typically pays coupons only during the first Eve years
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B) sells for a price that is greater than the face value

C) has no interest payments and is thus non-taxable until maturity
D) is also known as a deep discount bond
E) provides no cash flow to the holder at maturity

68. ___________ will cause the slope of the term structure of interest rates to increase.
I. An expected increase in the rate of inflation
II. An increase in the interest rate risk premium
III. An increase in the real rate of interest
A) I and II only
B) II only
C) I, II and III
D) I only
E) I and III only
69. J&J Enterprises wants to issue eighty 20-year, $1,000 zero-coupon bonds. If each bond is to yield
8%, how much will J&J receive (ignoring issuance costs) when the bonds are issued?
A) $11,212
B) $17,164
C) $20,000
D) $12,393
E) $18,880

70. A bond sold five weeks ago for $1,100. The bond is worth $1,050 in today’s market. Assuming no
changes in risk, which of the following is true?
A) The bond must be within one year of maturity
B) The face value of the bond must be $1,100
C) The coupon payment of the bond must have increased
D) Interest rates must be lower now than they were five weeks ago
E) The bond’s current yield has increased from five weeks ago

71. Which of the following is NOT a typical negative bond covenant?

A) The firm cannot merge with another firm
B) The firm cannot pledge any assets to other lenders
C) The firm cannot issue additional long-term debt
D) The firm must limit dividend payments
E) The firm cannot allow its bond ratings to fall below their initial level

72. If investors are uncertain that they will be able to sell a corporate bond quickly, the investors will
demand a higher yield in the form of
A) an increased interest rate risk premium
B) an increased real rate of interest
C) an increased liquidity risk premium
D) an increased default risk premium
E) an increased inflation premium

73. Suppose you purchase a zero coupon bond, face value $1,000 maturing in twenty years, for
$214.55. What is the implicit interest, in dollars, in the first year of the bond’s life?
A) $80.00
B) $16.84
C) $39.27
D) $17.16
E) $14.86
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74. J&J Manufacturing just issued a bond with a $1,000 face value and a coupon rate of 7%. If the
bond has a life of 30 years, pays annual coupons, and the yield to maturity is 6.8%, what is the
present value of the bond’s coupons?
A) $1,025.32
B) $138.95
C) $886 37
D) $241.15
E) $921.12

75. Which of the following is a basic component that affects the term structure of interest rates?
I. The expected rate of inflation
II. The interest rate risk premium
III. The real rate of interest
A) I and III only
B) I and II only
C) I, II and III
D) I only
E) II only

76. Debt can be subordinated to equity.

A) False
B) True

77. King Noodles’ bonds have a 7.5% coupon rate. Interest is paid quarterly and the bonds have a
maturity of 8 years. If the appropriate discount rate is 8% on similar bonds, what is the value of
King Noodles bonds?
A) $992.10
B) $971.27
C) $970.87
D) $989.63
E) $970.66

78. Moody’s and Standard and Poor’s primarily consider interest rate risk rather than default risk when
they rate debt.
A) False
B) True

79. Which of the following is NOT true?

A) Bond prices and market interest rates move in opposite directions.
B) When the coupon rate on a bond equals the market interest rate, the bond will sell for par
regardless of its time-to-maturity.
C) For two bonds identical but for maturity, the price of the shorter-term bond will be more
sensitive to changes in market rates than the longer-term bond.
D) When a bond’s coupon rate is greater than the market’s required return, the bond’s market value
will be greater than its par value.
E) For two bonds identical but for coupon, the price of the lower-coupon bond will be more
sensitive to changes in market rates than the higher-coupon bond

80. What would you pay for a bond that pays an semi-annual coupon of $100, has a face value of
$1,000, matures in 22 years, and has a yield to maturity of 12%?
A) $912,59
B) $888,56
C) $846,17
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D) $825,26
E) $801,33

81. The inflation premium in the yield curve can either increase or decrease as maturity increases,
depending on expectations about future rates of inflation.
A) True
B) False

82. The bonds of Microhard, Inc. carry a 10% annual coupon, have a $1,000 face value, and mature in
4 years. Bonds of equivalent risk yield 7%. The market value of Microhard’s bonds should be
A) $1,101.62
B) $1,095.66
C) 1,160.25
D) $1,087.25
E) $1,011.20

83. A bond that pays no coupons at all and is sold at a discount is called a zero coupon bond.
A) True
B) False

84. J&J Manufacturing just issued a bond with a $1,000 face value and a coupon rate of 7%. If the
bond has a life of 30 years, pays annual coupons and the yield to maturity is 6.8%, what percent of
the bonds price is the present value of the face value?
A) 7.0%
B) 13.5%
C) 14.31
D) 100.00%
E) 13.9%

85. You purchased a bond a year ago for $839.67 and just received the annual coupon of $80. You sell
the bond today for $829.33. What is the real return if inflation for the year is 5%?
A) 6.47%
B) 6.02%
C) 3.14%
D) 10.26%
E) 9.80%

86. Cornerstone Industries has a bond outstanding that has a 7% coupon rate and a market price of
$887.76. The bond matures in 5 years and interest is paid on a semi-annual basis, what is the yield
to maturity on the bond?
A) 14.9%
B) 5.5%
C) 9.9%
D) 4.9%
E) 7.5%

87. An upward sloping yield curve reflects investors’ desire for compensation for interest rate risk.
A) False
B) True

88. When pricing bonds, if a bond’s coupon rate is less than the required rate of return, then
A) the bond sells at a discount if it has a long maturity, a premium if it has a short maturity
B) a portion of the income a buyer of this bond will receive comes from buying the bond at less
than the par value
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C) the holder of the bond (the investor) is assured of a profit when the bond is sold regardless of
when it was purchased
D) the bond sells at a premium if it has a long maturity, a discount lit has a short maturity
E) the bond sells at par because the required rate of return is adjusted to reflect the discrepancy

89. If investors require a 7% nominal return and the expected inflation rate is 3%, what is the
APPROXIMATE expected real return?
A) 3.88%
B) 1.04%
C) 10.21%
D) 3.00%
E) 4.00%

90. Assume the required return on a zero-coupon bond will remain constant over the remainder of its
life. The market value of the bond will
A) remain unchanged
B) decrease each year by an amount equal to the bond’s yield to maturity
C) increase each year by an amount equal to the imputed coupon rate for the period
D) increase each year by an amount equal to the bond’s current yield
E) increase each year by an amount equal to the imputed interest for the period

91. Suppose you open The WaIL Street Journal and see that 30-year Treasury bonds are yielding 8.5
percent This is an example of
A) a nominal return
B) a real return
C) a taxability premium
D) an inflation premium
E) a default risk premium

92. Bond ratings issued by Moody’s and Standard & Poor’s specifically account for default risk.
A) False
B) True

93. Assume you are considering two bonds identical in every way but for coupon frequency - bond A
pays interest annually, and bond B pays interest semiannually. Then, if they have the same price
and sell at a premium over par, the yield-to-maturity on bond A will always be greater than that on
bond B.
A) True
B) False

94. What is the current yield on a 25% coupon bond with 1 years left until maturity and a listed close of
125.70?
A) 79.55%
B) 19.89%
C) 4.97%
D) 9.94%
E) 39.78%

95. A/an ________ is secured only by the reputation of the issuing firm.
A) straight bond
B) debenture
C) unfunded bond
D) registered bond
E) bearer bond
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96. “Unfunded debt” refers to long-term debt.

A) True
B) False

97. A bond with an annual coupon of$100 originally sold at par for $1,000. The current market interest
rate on this bond is 9%. Assuming no change in risk, this bond would sell at a ____ in order to
compensate __________
A) premium; the purchaser for the above market coupon rate
B) discount; the purchaser for the above market coupon rate
C) premium; the seller for the above market coupon rate
D) discount; the seller for the above market coupon rate
E) discount; the issuer for the higher cost of borrowing

98. All else equal, the market value of a corporate bond is always inversely related to its
I. time to maturity
II. coupon rate
III. yield-to-maturity
A) I only
B) I and III only
C) II only
D) I, II and III
E) III only

99. __________ included in the bond indenture to protect bondholders from certain actions by the
company.
A) Debentures are
B) Covenants are
C) A description of dedicated capital is
D) Indentures are
E) Articles of incorporation are

100. __________is an account into which periodic payments are made for the purpose of retiring a bond
issue.
A sinking fund
B) A call option
C) An indenture
D) A covenant
E) A debenture

101. Which of the following provisions would NOT be listed in the bond indenture?
A) The total amount of the bonds issued
B) Interest rate on bank loans
C) Protective covenants
D) Amount of bonds issued
E) Repayment arrangements