Question 1. The most important feature of municipal bonds is _____.
the wide range of denominations and maturities
that the interest is not taxable by the federal government
the risk-free nature of this investment
its appeal to investors needing growth
Question 2. For the major bond-rating agencies, the lowest level of an investment grade bond is _____.
AA (investment grade includes AAA and AA)
A (investment grade includes AAA, AA, and A)
BBB (investment grade includes AAA, AA, A, and BBB)
B (investment grade includes AAA, AA, A, BBB, BB, and B)
Question 3. A corporate bond quoted at 108.25 is selling for _____.
$108.25
$1,082.50
$10,825
None of the above
Question 4. Assume a $1,000 treasury bill is quoted to pay 7% interest over a three-month period. What will be the price of the treasury bill?
$982.50
$980
$970
$980.50
Question 5. When should an investor calculate both yield to maturity and yield to call?
An investor should calculate both yield to maturity and yield to call whenever there is a call provision.
An investor should calculate both yield to maturity and yield to call when the sum of the present values of the interest payments exceeds the call price.
An investor should calculate both yield to maturity and yield to call when the market price is greater than or equal to the call price.
An investor should calculate both yield to maturity and yield to call whenever the funds can be reinvested.
Question 6. What will happen to the market value of a bond if interest rates increase?
The market value will decrease.
The market value will increase.
The market value will increase or decrease, depending on the general economic climate.
The market value should remain level.
Question 7. Short-term interest rates have _____ volatility in comparison to long-term interest rates.
much less
more
equal
slightly less
Question 8. The duration of a bond is determined by a combination of the maturity date and value, and _____.
the pattern of coupon payments
the call premium
the put premium
None of the above
Question 9. Factors which influence the relationship between duration and maturity include all of the following EXCEPT _____.
the face value of the bond
the coupon rate of the bond
the number of years to maturity
None of the above
Question 10. The duration on an 8%, 25-year bond is _____ the duration on a 9%, 30-year bond.
greater than
less than
equal to
There is not enough information to tell