1. Which of the following statements regarding bond terminologies is INCORRECT?

A. The written, legally binding agreement between the corporate borrower and the lender detailing the terms of a bond issue is called the indenture.

B. The unsecured long-term debts of a firm are commonly called debentures.  

C. A special account that sets aside periodic payments for bond redemption is called a sinking fund.

D. An agreement giving the bond issuer the option to repurchase the bond at a specified price prior to maturity is called the zero provision.

2. Which of the following statements regarding bond trading is INCORRECT?

A. The long-term bonds issued by the U.S. government are called Treasury Bills.

B. The long-term bonds issued by state and local governments in the United States are called municipal bonds.  

C. A bond that makes no coupon payments (and thus is initially priced at a deep discount) is called a zero coupon bond.  

D. The price a dealer is willing to pay for a security is called the bid price.