When the market interest rate rises above the coupon rate for a particular quality of bond and the bond price declines, the new expected yield is called the:
Answer
coupon rate or yield
current yield
book value yield
net present value yield
2 points
___________________ has the lowest claim on the assets and cash flow of the firm.
Answer
A bond
A subordinated debenture
Preferred stock
Common stock
Which of the following bonds may be secured by home mortgages?
Answer
mortgage bonds
collateralized mortgage obligations
closed-end mortgage bonds
open-end mortgage bonds
Which of the following is considered to be the most risky?
Answer
U.S. government bonds
mortgage bonds
corporate bonds
common stocks
To accurately compare the rate of return on one investment with another, they should be:
Answer
equal in size or dollar amount
measured over different time periods
measured over equal time periods
held for more than one year
A bond that allows the same assets to be used as security in future issues is called a (n):
Answer
first mortgage bond
equipment trust certificate
closed-end mortgage bond
open-end mortgage bond
Which of the following risks would not be faced by investors in domestic bonds?
Answer
credit (or default) risk
interest rate risk
reinvestment rate (or rollover) risk
exchange rate risk
A speculative (junk) bond issue as rated under Standard & Poor's would be rated ______ or below:
Answer
AA-
BB+
CCC
CC
A current yield on a corporate bond is calculated as:
Answer
coupon interest amount divided by par value
coupon interest rate times the par value
coupon interest amount divided by the current price
coupon interest rate times the current price
Which of the following types of stocks have the lowest risk to shareholders?
Answer
common stock
cumulative preferred stock
non-cumulative preferred stock
callable preferred stock