FIN 6100 EXAM 1 QUESTIONS WITH
100% CORRECT ANSWERS | LATEST
VERSION 2025/2026.
A bond that makes no coupon payments and is initially priced at a deep discount is called a
_____ bond. - ANS zero coupon
The written agreement between a corporation and the bondholder's representative is called
the - ANS indenture
Bonds below BBB or Baa are called - ANS junk bonds
If a bond was issued at par, the quoted price of the bond will not necessarily equal the par
value of the bond after issuance because - ANS market interest rates have changes and or
interest have accrued
The call policy that maximizes shareholder wealth is to call a bond issue when the -
ANS bond's price equals or exceeds the call price
Floating rate bonds are bonds with - ANS floating coupon rates tied to an interest rate index
A bond has a call provision. The call provision allows the _________ to _________ the bonds
before maturity - ANS issuer; call in
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, If its yield to maturity is less than its coupon rate, a bond will sell at a _____, and increases in
market interest rates will _____ - ANS premium; decrease this premium
Debt ratings issued by companies such as Moody's and Standard and Poor's depend on -
ANS the probability of firm default and protection given in the indenture in case of default
All else constant, a bond will sell at ______ when the yield to maturity is _____ the coupon rate
- ANS discount; higher than
Suppose that a bond is issued at its par value or face value. If market interest rates rise after the
issue, the price of the bond will likely - ANS fall below its par value
The efficient portfolios - ANS provide highest returns for a given level of risk and provide
least risk for a given level of returns
The correlation meausres the - ANS direction of movement between the returns of two
stocks
Maximum diversification is obtained by combining two stocks with a correl. coefficient equal to
- ANS -1
Beta of the market portfolio is - ANS +1
Beta of treasury bills portfolio is - ANS 0
The CAPM states that - ANS the expected risk premium on an investment is proportion to
beta
Bet measure indicates - ANS the change in the rate of return on an investment for a given
change in the market return
2 | Page @COPYRIGHT 2025/2026 ALLRIGHTS RESERVED
100% CORRECT ANSWERS | LATEST
VERSION 2025/2026.
A bond that makes no coupon payments and is initially priced at a deep discount is called a
_____ bond. - ANS zero coupon
The written agreement between a corporation and the bondholder's representative is called
the - ANS indenture
Bonds below BBB or Baa are called - ANS junk bonds
If a bond was issued at par, the quoted price of the bond will not necessarily equal the par
value of the bond after issuance because - ANS market interest rates have changes and or
interest have accrued
The call policy that maximizes shareholder wealth is to call a bond issue when the -
ANS bond's price equals or exceeds the call price
Floating rate bonds are bonds with - ANS floating coupon rates tied to an interest rate index
A bond has a call provision. The call provision allows the _________ to _________ the bonds
before maturity - ANS issuer; call in
1 | Page @COPYRIGHT 2025/2026 ALLRIGHTS RESERVED
, If its yield to maturity is less than its coupon rate, a bond will sell at a _____, and increases in
market interest rates will _____ - ANS premium; decrease this premium
Debt ratings issued by companies such as Moody's and Standard and Poor's depend on -
ANS the probability of firm default and protection given in the indenture in case of default
All else constant, a bond will sell at ______ when the yield to maturity is _____ the coupon rate
- ANS discount; higher than
Suppose that a bond is issued at its par value or face value. If market interest rates rise after the
issue, the price of the bond will likely - ANS fall below its par value
The efficient portfolios - ANS provide highest returns for a given level of risk and provide
least risk for a given level of returns
The correlation meausres the - ANS direction of movement between the returns of two
stocks
Maximum diversification is obtained by combining two stocks with a correl. coefficient equal to
- ANS -1
Beta of the market portfolio is - ANS +1
Beta of treasury bills portfolio is - ANS 0
The CAPM states that - ANS the expected risk premium on an investment is proportion to
beta
Bet measure indicates - ANS the change in the rate of return on an investment for a given
change in the market return
2 | Page @COPYRIGHT 2025/2026 ALLRIGHTS RESERVED
