Question 1 � Bonds that are secured by personal property are called Question 2 � Leveraged buyouts are commonly financed by the issuance of: Question 3 � Bonds issued by ____ are backed by the federal government. Question 4 � The Treasury has relied heavily on ____-year bonds to finance the U.S. budget deficit. Question 5 � The coupon rate of most variable-rate bonds is tied to Question 6 � Assume that you purchased corporate bonds one year ago that have no protective covenants. Today, it is announced that the firm that issued the bonds plans a leveraged buyout. The market value of your bonds will likely ____ as a result. Question 7 � ____ require the owner to clip coupons attached to the bonds and send them to the issuer to receive coupon payments. Question 8 � Assume U.S. interest rates are significantly higher than German rates. A U.S. firm with a German subsidiary could achieve a lower financing rate, without exchange rate risk by denominating the bonds in Question 9 � Which of the following would not be a likely example of a protective covenant provision? Question 10 � A ten-year, inflation-indexed bond has a par value of $10,000 and a coupon rate of 5 percent. During the first six months since the bond was issued, the inflation rate was 2 percent. Based on this information, the coupon payment after six months will be $____. Question 11 � A call provision on bonds normally Question 12 � When firms issue ____, the amount of interest and principal to be paid is based on specified market conditions. The amount of the repayment may be tied to a Treasury bond price index or even to a stock index. Question 13 � Bonds that are not secured by specific property are called Question 14 � Investors in Treasury notes and bonds receive ____ interest payments from the Treasury. Question 15 � When would a firm most likely call bonds? Question 16 � When two securities have the same expected cash flows, the value of the ____ security will be higher than the value of the ____ security. Question 17 � If investors rely strictly on modified duration to estimate the percentage change in the price of a bond, they will tend to ____ the price decline associated with an increase in rates and ____ the price increase associated with a decrease in rates. Question 18 � As interest rates consistently rise over a specific period, the market price of a bond you own would likely ____ over this period. (Assume no major change in the bond’s default risk.) Question 19 � The appropriate discount rate for valuing any bond is the Question 20 � Which of the following bonds is most susceptible to interest rate risk from an investor’s perspective? Question 21 � If analysts expect that the demand for loanable funds will decrease, and the supply of loanable funds will increase, they would most likely expect interest rates to ____ and prices of existing bonds to ____. Question 22 � Which of the following will most likely cause bond prices to increase? (Assume no possibility of higher inflation in the future.) Question 23 � As interest rates increase, long-term bond prices Question 24 � From the perspective of investing institutions, the most attractive foreign bonds offer a ____ and are denominated in a currency that ____ over the investment horizon. Question 25 � The bonds that are most sensitive to interest rate movements have Question 26 � If a financial institution’s bond portfolio contains a relatively large portion of ____, it will be ____. Question 27 � As interest rates consistently decline over a specific period, the market price of a bond you own would likely ____ over this period. (Assume no major change in the bond’s default risk.) Question 28 � With a(n) ____ strategy, funds are allocated to bonds with a short term to maturity and bonds with a long term to maturity. Thus, this strategy allocates some funds to achieving a relatively high return and other funds to covering liquidity needs. Question 29 � In the ____ strategy, funds are allocated to bonds with a short term to maturity and bonds with a long term to maturity. Question 30 � Which of the following formulas best describes the value of a bond?
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