1) How can you describe bond issuers?
1. Government
2. Corporate (public and private)
3. Household
4. Foreign
Bond issuers include:
A. 1and2
B. 1,2,and3
C. 2,3,and4
D. 1,2and4
2) Which of the following is not the Face Value (usually $1,000 in the US) of a bond?
A. Nominalvalue
B. Couponrate
C. Maturityvalue
D. Parvalue
3) The difference between a general obligation and a revenue bond is:
A. A general obligation bond is backed by the full faith,credit and “taxing power” of the government unit
B. For a revenue bond, the repayment of the issue is fully dependent on the revenue-generating capability of a specific project or venture
C. General obligation bonds are usually of high quality because of the taxing power behind most of them
D. All of the above
4) Your company is going to start a new project using retained earnings. Which of the following is true:
A. There is no way to calculate the Weighted Average Cost of Capital (WACC) before the project begins.
B. There will be no project risks so the required rated of return is very low.
C. The required rate of return is the company’s WACC
D. Use the company’s book value to determine WACC