Essentials Of Investments
11th Edition
ISBN: 9781260013924
Author: Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher: Mcgraw-hill Education,
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Question
Which of the following statements about sinking fund is NOT true?
A |
Sinking fund provision facilitates the orderly retirement of the bond issue. |
|
B |
A company would prefer to use sinking fund to call bond if interest rate is below the coupon rate. |
|
C |
A company would use sinking fund to call bond if interest rate is well above coupon rate. |
|
D |
It is a good strategy for a firm to use its sinking fund to call bond if bond sells at a big premium. |
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- These are corporate bonds that have a higher rate of return with a higher level of risk? Group of answer choices Revenue bonds Junk bonds GOBs Tax increment bondsarrow_forwardWhat are the characteristics of a zero-coupon bond, and why do investors purchase them despite the fact that they pay no interest?arrow_forwardWhich of the following statement is wrong? Group of answer choices a)the coupon rate of a newly issued bond is generally set equal to the required rate on bonds of equal risk. b)Since short-term interest is more volatile than the long-term interest rate, the price risk of short-term bond is more than that of the long-term bond c)The required rate of return for AAA bond is lower than that of an AA bond d)Sinking funds are provisions included in bond indentures that require companies to retire bonds on a scheduled basis prior to their final maturity.arrow_forward
- Which statement is false? O A. As the term of a bond approaches zero, the price approaches kar. O B. For corporate and government bonds, the coupon payments amortize the princi OC. Overall, bond prices are less volatile than stock prices. O D. The coupon on a bond is expressed as a percentage of face value. O E. Corporate bonds can be bought and sold in the secondary market. Reset Selectionarrow_forwardThe time value of money is used in calculating bond prices because: Group of answer choices A - The company might choose to repay the bonds prior to their maturity date B - Bond investors receive future payments and purchase bonds with current dollars C - The amount to be repaid at maturity will change as market rates change D - Cash interest payments to bondholders will change as market rates changearrow_forwardWhat causes a gain or loss on the sale of a bond investment? Group of answer choices when the selling company negotiates a better price when the selling price of the bond differs from the book value (cost) of the bond when the selling company has unamortized discounts when the selling company has unamortized premiumsarrow_forward
- Why do at least some investors like to invest in asset-backed securities? Check all that apply: ABS are less risky than bonds with the same rating. It lowers their capital requirements. It gives them control over more assets. ABS often pay higher interest rates than bonds with the same rating.arrow_forwardA bond does not pay out regular interest. This means that *a. This is a bad investment.b. It is unsecured.c. It is a junk bond.d. It is a zero-coupon bond.arrow_forwardWhich of the following is not an effect of a call provision? A. Issuer can refund the bond issue if rates decline. B. Requires the issuer to pay off the loan over its life rather than all at maturity. C. Bond investors require higher yields on callable bonds D. Upon calling bonds the issuer must pay call premium to bond holder E. All of the above are effects of a call provisionarrow_forward
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