FIN 350 Chapter 10 Practice Problems
Exam With Complete Solutions
Why would a U.S. firm issue bonds overseas?
A. The Securities and Exchange Commission guarantees investors a safe
return.
B. U.S. investors are more interested in buying common stock.
C. Interest rates may be lower overseas.
D. To help promote the U.S. dollar as a global currency. - ANSWER C.
Interest rates may be lower overseas.
Is this statement correct: Eurodollar bond are issued only in Europe and
are denominated in dollars?
Yes
No, Eurodollars bonds can be issued in any country, except the United
States.
No, Eurodollar bonds are denominated in euros.
, No, Eurodollar bonds are issued only in the United States and are
denominated in euros. - ANSWER No, Eurodollars bonds can be issued in
any country, except the United States.
Bond ratings are a way for investors to measure:
a bond's credit risk.
the credit rating of the bond issuer.
the quality of a company.
whether the bond will be a good investment. - ANSWER a bond's credit
risk.
The "current yield" of a bond is equal to:
its coupon rate.
the annual interest payment / par value.
its yield to maturity.
the annual interest payment / current price. - ANSWER the annual interest
payment / current price.
A U.S. corporate bond has a 6 percent coupon rate and a par value of
$1,000. It will pay interest of:
$60 once a year.
$30 every six months.
$60 every six months
$5 each month. - ANSWER $30 every six months.
A bond that is an unsecured obligation of the issuer—in other words, there
are no specific assets pledged as collateral in case the issuer cannot repay
the bondholders, is called:
Exam With Complete Solutions
Why would a U.S. firm issue bonds overseas?
A. The Securities and Exchange Commission guarantees investors a safe
return.
B. U.S. investors are more interested in buying common stock.
C. Interest rates may be lower overseas.
D. To help promote the U.S. dollar as a global currency. - ANSWER C.
Interest rates may be lower overseas.
Is this statement correct: Eurodollar bond are issued only in Europe and
are denominated in dollars?
Yes
No, Eurodollars bonds can be issued in any country, except the United
States.
No, Eurodollar bonds are denominated in euros.
, No, Eurodollar bonds are issued only in the United States and are
denominated in euros. - ANSWER No, Eurodollars bonds can be issued in
any country, except the United States.
Bond ratings are a way for investors to measure:
a bond's credit risk.
the credit rating of the bond issuer.
the quality of a company.
whether the bond will be a good investment. - ANSWER a bond's credit
risk.
The "current yield" of a bond is equal to:
its coupon rate.
the annual interest payment / par value.
its yield to maturity.
the annual interest payment / current price. - ANSWER the annual interest
payment / current price.
A U.S. corporate bond has a 6 percent coupon rate and a par value of
$1,000. It will pay interest of:
$60 once a year.
$30 every six months.
$60 every six months
$5 each month. - ANSWER $30 every six months.
A bond that is an unsecured obligation of the issuer—in other words, there
are no specific assets pledged as collateral in case the issuer cannot repay
the bondholders, is called:
