Multiple choice questions using bond basics.

1.  Which of the following bonds is sold by a corporation at a discount and pays no interest?

a.         An indenture bond.

b.        A zero coupon bond.

c.         A junk bond.

d.        A Eurobond.

2.  Which of the following bonds is secured by a lien on real property?

a.         A zero based preferred.

b.        A par value bond.

c.         A subordinated indenture.

d.        A mortgage bond.

3.  Which of the following statements about bonds is true?

a.         Bond prices move in the same direction as market interest rates.

b.        If market interest rates change, long-term bonds will fluctuate more in value than short-term bonds.

c.         Long-term bonds are less risky than short-term bonds.

d.        If market interest rates are higher than a bonds coupon interest rate, then the bond will sell above its par Value.

e.         None of the above.

4.   Which of the following statements about bonds is true?

a.         If market interest rates are below a bonds coupon interest rate, then the bond will sell above its par value.

b.        Long-term bonds have less interest rate risk than do short-term bonds.

c.         Bond prices move in the same direction as market interest rates.

d.        As the maturity date of a bond approaches, the market value of a bond will become more volatile.

e.         None of the above.

5.  Which of the following statements about bonds is true?

a.         If market interest rates are below a bonds coupon interest rate, then the bond will sell beiow its par value.

b.        Long-term bonds have less interest rate risk than do short-term bonds.

c.         Bond prices move in the same direction as market interest rates.

d.        As the maturity of a bond approaches, its market value approaches its par value.

e.         None of the above.