1. Private placements refer exclusively to stock issues sold to insurance companies or individuals. (Points. 1)

True

False

2. While Treasury bonds and bills are quoted on the basis of price, Treasury note are quoted on the basis of yield. (Points. 1)

True

3. The dollar volume of new corporate debt issues has exceeded the dollar volume of new corporate equity issues for many years. (Points. 1)

True

4. A bond quote of 91 7/8 on a $1,000 par value bond means the bond is trading at $918.75. (Points. 1)

True

False

5. Corporate issues make up the largest percentage of new debt offerings in the bond market. (Points. 1)

True

False

6. There is customarily a small spread between bid and asked prices of treasury notes and bonds because (Points. 1)

They are traded at a discount from par

There are not many government securities dealers

7. The demand side of the bond market is dominated by (Points. 1)

The federal government

Wealthy individual investors

Institutional investors

None of the above

8. The difference between a general obligation and a revenue bond is: (Points. 1)

The general obligation bond is backed by full faith, credit, and taxing power of the governmental unit

That for a revenue bond, the repayment of the issue is fully dependent on the revenue-generating capability of a specific project or venture

General obligation bonds are usually of high quality because of the taxing power behind most of them

All of the above

9. Junk bonds normally provide (Points. 1)

A higher yield than treasury bonds

A lower yield than treasury bonds

A lower yield than AA corporate bonds

More than one of the above is true

10. Inflation-indexed Treasury securities provide returns through (Points. 1)

Interest payments plus a conversion privilege

Interest payments plus an increase in value due to inflation

Tax exempt interest payments

Cumulative interest payments

11. The primary difference between jumbo and small Certificates of Deposit, besides dollar amount, is (Points. 1)

There is no secondary market for small certificates of deposit

None of the above

12. The yield spread between junk bonds and high quality bonds is greatest when (Points. 1)

Debenture

Bond subordination

14. The most important feature of municipal bonds is (Points. 1)

The wide range of denominations and maturities

The interest is not taxable by the federal government

The risk-free nature of this investment

Its appeal to investors needing growth

15. Which of the following is NOT a characteristic of preferred stock as an investment? (Points. 1)

Preferred stockholders are entitled to receive their dividend prior to payment of dividends to common stockholders

Preferred stock dividends are taxed at the capital gains rate for individual investors

Preferred stock dividends may be omitted by the corporation under certain circumstances

It is a hybrid security of common stock and debt

16. A descending term structure reflects the view that rates will increase in the future. (Points. 1)

True

False

17. An ascending term structure reflects the view that rates will increase in the future. (Points. 1)

18. The key to a pure pickup yield swap is that the bond price of one or both bonds has to be in disequilibrium. (Points. 1)

True

19. The reinvestment assumption would have no effect on yield if the bond is held to maturity. (Points. 1)

True

21. The Oxford Fixed Income Fund invests heavily in bonds. If the fund manager thinks that interest rates are going to fall, what changes should she make in her investment portfolio? (Points. 1)

Increase investment in long-term bonds

Increase investment in short-term debt instruments

Buy callable bonds

Buy real assets

22. With a pure pickup yield swap (Points. 1)

The owner thinks he can decrease the yield to maturity by selling a bond and buying a different bond of less risk

The market is assumed to be totally efficient

The key to the swap is that the bond price of one or both bonds has to be in disequilibrium

None of the above

23. When the bond investor believes interest rates are going to fall, the best strategy would be to (Points. 1)

Take a bearish position in the market by selling long-term bonds

Take a bullish position in the market by buying long-term bonds

Move out of bonds completely

Keep his portfolio unchanged

24. What is the price of a $1,000 perpetual par bond with a coupon rate of 10 percent and a current yield of 8 percent? (Points. 1)