A bond issue with a face amount of $500,000 bears interest at the rate of 7%. The current market rate of interest is 8%

A bond issue with a face amount of $500,000 bears interest at the rate of 7%. The current market rate of interest is 8%. These bonds will sell at a price that is:

A) Equal to $500,000.

B) More than $500,000.

C) Less than $500,000.

D) The answer cannot be determined from the information provided.

Answer: C

A bond issue with a face amount of $500,000 bears interest at the rate of 7%. The current market rate of interest is 6%. These bonds will sell at a price that is:

A) Equal to $500,000.

B) More than $500,000.

C) Less than $500,000.

D) The answer cannot be determined from the information provided.

Answer: B

Serial bonds are:

A) Bonds backed by collateral.

B) Bonds that mature in installments.

C) Bonds with greater risk.

D) Bonds issued below the face amount.

Answer: B

A home loan with fixed monthly payments and the house as collateral most closely represents which of the following bond characteristics?

A) Secured and term.

B) Secured and serial.

C) Unsecured and term.

D) Unsecured and serial.

Answer: B

Which of the following is not true regarding callable bonds?

A) This feature allows the issuer to repay the bonds before their scheduled maturity date.

B) This feature helps protect the issuer against future decreases in interest rates.

C) This feature usually allows the issuer to repay bonds just below face value.

D) This feature benefits the issuer more when the bond's stated rate is 8% and the market interest rate is 5%.

Answer: C

Bonds can be secured or unsecured. Likewise, bonds can be term or serial bonds. Which is more common?

A) Secured and term.

B) Secured and serial.

C) Unsecured and term.

D) Unsecured and serial.

Answer: C