IFIC Chapter 7 questions n answers
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_________are debt issued by an entity in the financial market and sold to investors. These securities
represent the debt of the issuing entity and investors become creditors of the issuing organization. -
correct answer ✔✔1. Fixed income securities
The terms of a fixed-income security include a promise to repay the maturity value or principal on the
maturity date, and to pay interest at stated intervals over the life of the security. These regular payments
made from the issuer to the holder of the debt are called _______. - correct answer ✔✔1. Coupons
Corporations also borrow to take advantage of ______. If a corporation believes they can earn a greater
return on cash invested in their business than it would cost to borrow money, they can increase the
return on the business by borrowing money. - correct answer ✔✔1. Leverage
Bonds are considered loans that investors make to governments and corporations. The borrower (the
government or corporation) agrees to make regular interest payments (coupon payments) and pay back
the principal or _____ (original amount issued) on the bond's maturity date. - correct answer ✔✔1. Par
value
Almost all bonds promise to make semi-annual (every six months) coupon payments to the bondholders.
The amount of the coupon payment depends on the bond's annual _______. This rate is usually fixed
over the entire life of the bond at issuance—for example, 6% of the par value over the term of the bond.
- correct answer ✔✔1. Coupon rate
The ________ is the date at which the bond matures or expires. On this date, the bondholder expects to
get the par value or principal of the bond paid back. - correct answer ✔✔1. Maturity date
Bond prices are quoted using an index with a base value of 100. A bond trading at 100 is said to be
trading at face value, or par. A bond trading below par, say at a price of 98, is said to be trading at a
______ (the 98, based on the index of 100, indicates the bond is trading at 98% of par). A bond trading
above par, say at a price of 104, is said to be trading at a _____. - correct answer ✔✔1. Discount
2. Premium
rated A+
_________are debt issued by an entity in the financial market and sold to investors. These securities
represent the debt of the issuing entity and investors become creditors of the issuing organization. -
correct answer ✔✔1. Fixed income securities
The terms of a fixed-income security include a promise to repay the maturity value or principal on the
maturity date, and to pay interest at stated intervals over the life of the security. These regular payments
made from the issuer to the holder of the debt are called _______. - correct answer ✔✔1. Coupons
Corporations also borrow to take advantage of ______. If a corporation believes they can earn a greater
return on cash invested in their business than it would cost to borrow money, they can increase the
return on the business by borrowing money. - correct answer ✔✔1. Leverage
Bonds are considered loans that investors make to governments and corporations. The borrower (the
government or corporation) agrees to make regular interest payments (coupon payments) and pay back
the principal or _____ (original amount issued) on the bond's maturity date. - correct answer ✔✔1. Par
value
Almost all bonds promise to make semi-annual (every six months) coupon payments to the bondholders.
The amount of the coupon payment depends on the bond's annual _______. This rate is usually fixed
over the entire life of the bond at issuance—for example, 6% of the par value over the term of the bond.
- correct answer ✔✔1. Coupon rate
The ________ is the date at which the bond matures or expires. On this date, the bondholder expects to
get the par value or principal of the bond paid back. - correct answer ✔✔1. Maturity date
Bond prices are quoted using an index with a base value of 100. A bond trading at 100 is said to be
trading at face value, or par. A bond trading below par, say at a price of 98, is said to be trading at a
______ (the 98, based on the index of 100, indicates the bond is trading at 98% of par). A bond trading
above par, say at a price of 104, is said to be trading at a _____. - correct answer ✔✔1. Discount
2. Premium
