HW#1 Defining Elements: FIN240 Fixed Income - SECTION 90
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HW: Defining Elements: FIN240 Fixed Income - SECTION 90
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HW: Defining Elements Due
Feb 25 at 11:59pm
Points
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Questions
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Question 1
An example of a sovereign bond is a bond issued by:
the World Bank. the city of New York. the federal German government.
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1 / 1 pts
Question 2
The risk of loss resulting from the issuer failing to make full and timely
payment of interest is called:
interest rate risk. credit risk. systemic risk. 1 / 1 pts
Question 3
A money market security most likely matures in:
one year or less. over 10 years. between 1 and 10 years. 1 / 1 pts
Question 4
If the bond’s price is higher than its par value, the bond is trading at:
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a premium. par. a discount. 1 / 1 pts
Question 5
A bond has a par value of £100 and a coupon rate of 5%. Coupon
payments are made semi-annually. The periodic interest payment is:
£2.50, paid twice a year. £5.00, paid once a year. £5.00, paid twice a year. 1 / 1 pts
Question 6
The coupon rate of a floating-rate note that makes payments in June
and December is expressed as six-month MRR + 25 bps. Assuming
that the six-month MRR is 3.00% at the end of June 20XX and 3.50% at
the end of December 20XX, the interest rate that applies to the
payment due in December 20XX is:
3.50%.
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3.75%. 3.25%. 1 / 1 pts
Question 7
The type of bond that allows bondholders to choose the currency in
which they receive each interest payment and principal repayment is a:
dual-currency bond. pure discount bond. currency option bond. 1 / 1 pts
Question 8
The term most likely used to refer to the legal contract under which a
bond is issued is:
indenture. debenture. letter of credit.
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1 / 1 pts
Question 9
The individual or entity that most likely assumes the role of trustee for a
bond issue is:
the treasurer or chief financial officer of the issuer. a financial institution appointed by a regulatory authority. a financial institution appointed by the issuer. 1 / 1 pts
Question 10
The individual or entity most likely responsible for the timely payment of
interest and repayment of principal to bondholders is the:
primary or lead bank of the issuer. treasurer or chief financial officer of the issuer. trustee. 1 / 1 pts
Question 11
An example of an affirmative covenant is the requirement:
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that the debt-to-equity ratio will not exceed 0.4 and times interest earned
will not fall below 8.0.
to insure and perform periodic maintenance on financed assets. that dividends will not exceed 60% of earnings. 1 / 1 pts
Question 12
An example of a covenant that protects bondholders against the dilution
of their claims is a restriction on:
investments. debt. mergers and acquisitions. 1 / 1 pts
Question 13
An example of a domestic bond is a bond issued by:
LG Group from South Korea, denominated in British pounds, and sold in
the United Kingdom.
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Wal-Mart from the United States, denominated in US dollars, and sold in
various countries in North America, Europe, the Middle East, and Asia
Pacific.
the UK Debt Management Office, denominated in British pounds, and
sold in the United Kingdom.
1 / 1 pts
Question 14
The structure that requires the largest repayment of principal at maturity
is that of a:
fully amortized bond. bullet bond. partially amortized bond. 1 / 1 pts
Question 15
A plain vanilla bond has a maturity of 10 years, a par value of £100, and
a coupon rate of 9%. Interest payments are made annually. The market
interest rate is assumed to be constant at 9%. The bond is issued and
redeemed at par. The principal repayment the first year is closest to:
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£6.58. £10.00. £0.00. 1 / 1 pts
Question 16
Relative to a fully amortized bond, the coupon payments of an
otherwise similar partially amortized bond are:
equal. higher or equal. lower or equal. 1 / 1 pts
Question 17
The bonds that do not offer protection to the investor against increases
in market interest rates are:
inverse floating-rate notes. floating-rate notes. step-up bonds.
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1 / 1 pts
Question 18
The US Treasury offers Treasury Inflation-Protected Securities (TIPS).
The principal of TIPS increases with inflation and decreases with
deflation based on changes in the US Consumer Price Index. When
TIPS mature, an investor is paid the original principal or inflation-
adjusted principal, whichever is greater. TIPS pay interest twice a year
based on a fixed real coupon rate that is applied to the inflation-
adjusted principal. TIPS are most likely:
indexed-annuity bonds. capital-indexed bonds. interest-indexed bonds. 1 / 1 pts
Question 19
The type of bond with an embedded option that would most likely sell at
a lower price than an otherwise similar bond without the embedded
option is a:
convertible bond. callable bond. putable bond.
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1 / 1 pts
Question 20
The put provision of a putable bond:
limits the risk to the bondholder. does not materially affect the risk of either the issuer or the bondholder. limits the risk to the issuer. Quiz Score: 20
out of 20
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Match the option with the lowest monthly payment to highest monthly payment.
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Miguel takes a car loan for $16,000. The loan is for 60 months and has an interest rate of 4%. There are an additional
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Suppose a customer rents a vehicle for four months from Rent-A-Car on October 1, paying $4,000 ($1,000/month).
Record Rent-A-Car's adjusting entry on December 31. (If no entry is required for a transaction/event, select "No journal entry
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Record Rent-A-Car's adjusting entry on December 31.
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listed in their normal sequence -- rather they are listed in alphabetical sequence.)
Account Name
_Debit_
Credit_
Gradin
Accounts Payable
26,000
Accounts Receivable
28,850
Cash
10,000
Common Stock
12,500
Cost of Goods Sold
68,000
Equipment
73,000
150
Interest Expense
Interest Payable
500
Inventory
45,000
Note Payable
21,000
Retained Earnings
53,000
Sales Revenue
179,000
Supplies Expense
7,000
Wages Expense
60,000
Total
292,000
292,000
Place the accounts in the correct order.
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