QUESTION Which of the following indicates the amount of debt a city takes on by issuing a particular bond? A) interest rate B) dividend C) yield D) denomination E) rating ANSWER Answer: D Explanation: D) Bonds are issued in denominations, in multiples of $1,000. A city that issues one $10,000 bond has taken on […]
QUESTION A conservative investor would buy bonds that receive which of the following Standard & Poor’s rating? A) AA B) BBB C) B D) CCC E) C ANSWER Answer: A Explanation: A) Bond ratings measure the quality and safety of a bond. The AA rating is Standard & Poor’s second highest rating: high quality. […]
QUESTION What do the Standard & Poor’s and Moody’s bond ratings provide an assessment of? A) book value B) risk C) dividends D) convertibility E) SEC compliance ANSWER Answer: B Explanation: B) Standard & Poor’s and Moody’s, the two principal rating services, issue bond ratings that reflect the issuer’s potential to default. A high […]
QUESTION All bonds have a maturity date at which the issuer must pay them off. What type of bond has two pay-off dates? A) sinking-fund bond B) serial bond C) prerefunded bond D) callable bond E) convertible bond ANSWER Answer: D Explanation: D) Issuers of callable bonds may specify a date before the full […]
QUESTION Mutual funds offer the opportunity for greater diversity of investment, so they present very little risk to clients. Indicate whether the statement is true or false. ANSWER Answer: FALSE Explanation: Mutual funds include a diverse array of stocks, bonds, and other securities; however, they may focus on a particular industry sector or investment […]
QUESTION Which of the following terms does NOT reflect a method to retire bonds? A) convertible bonds B) revenue bonds C) sinking-fund bonds D) callable bonds E) serial bonds ANSWER Answer: B Explanation: B) Convertible, sinking-fund, callable, and serial are all ways of paying off, or retiring, bonds. Revenue bonds are a type of […]
QUESTION What is the term for an investment bank’s practice of buying new issues of corporate securities and selling them to the public? A) syndication B) underwriting C) initial public offering D) auctioning E) institutional investing ANSWER Answer: B Explanation: B) The activity of buying new issues of stocks or bonds from issuing corporations […]
QUESTION The Massive Steel Corporation issued bonds to finance upgrades to its aging plants. The upgrades are costly, and the bond issue is a substantial amount. To ensure its ability to pay the bonds on maturity, Massive Steel makes annual payments to a dedicated fund. What type of bonds did the company issue? A) convertible […]
QUESTION The yield of a particular security is determined by dividing the dividend or income by the security’s market price. Indicate whether the statement is true or false. ANSWER Answer: TRUE Explanation: Yield is income from securities, calculated by dividing income or dividend by the market price. An investing-for-income strategy focuses on obtaining the […]
QUESTION Which of the following gives an investor a portion of ownership in the issuer of a security? A) U.S. Treasury bond B) bank certificate of deposit C) stock D) secured corporate bond E) municipal bond ANSWER Answer: C Explanation: C) Stocks represent shares of ownership in a company.