Bond Valuation

MCQ on Bonds and Bond Valuation - Test 1
MCQ: Second mortgages pledged against

bond's security are referred as
1. loan mortgages
2. medium mortgages
3. senior mortgages
4. junior mortgages
Answer D
MCQ: Long period of bond maturity leads to
1. more price change
2. stable prices
3. standing prices
4. mature prices
Answer A
MCQ: If coupon rate is equal to going rate of
interest then bond will be sold
1. at par value
2. below its par value
3. more than its par value
4. seasoned par value
1
Answer A
MCQ: Falling interest rate leads change to
bondholder income which is
1. reduction in income
2. increment in income
3. matured income
4. frequent income
Answer A
MCQ: Bonds issued by corporations and exposed to
default risk are classified as
1. corporation bonds
2. default bonds
3. risk bonds
4. zero risk bonds
Answer A

MCQ: Treasury bonds are exposed to additional risks that are included
1. reinvestment risk
2. interest rate risk
3. investment risk
4. Both A and B
Answer D
MCQ: If bond's call provision is practiced in first year of issuance then an additional
payment is classified as
1. issuance provision
2. bond provision
2
3. call provision
4. first provision
Answer C
MCQ: Reinvestment risk of bond's is higher on
1. short maturity bonds

2. high maturity bonds
3. high premium bonds
4. high inflated bonds
Answer A
MCQ: Bonds that have high liquidity premium are usually have
1. inflated trading
2. default free trading
3. less frequently traded
4. frequently traded
Answer C
MCQ: Bond which is offered below its face value is classified as
1. present value bond

2. original issue discount bond
3. coupon issued bond
4. discounted bond
Answer B

MCQ: Risk of fall in income due to fall in interest rates in future is classified as
1. income risk
2. investment risk
3. reinvestment risk
4. mature risk
Answer C
MCQ: Redemption option which protects investors against rise in interest rate is
considered as
3
1. redeemable at deferred
2. redeemable at par
3. redeemable at refund
4. redeemable at finding
Answer B
MCQ: Payment divided by par value is classified as
1. divisible payment
2. coupon payment
3. par payment
4. per period payment
Answer B
MCQ: An official entity that represents bondholders and ensures stated rules in
indenture is classified as
1. trustee
2. trust
3. stated entity
4. owner entity
Answer A
MCQ: An annual interest payment divided by current price of bond is considered as
1. current yield
2. maturity yield
3. return yield
4. earning yield
Answer A

MCQ: If coupon rate is more than going rate of interest then bond will be sold

3. at par value
Answer D
4
MCQ: Call provision practiced by company which states that call price will be paid is
classified as
1. super refund provision

2. super put redemption
3. make-whole call provision
4. super call provision
Answer C
MCQ: Difference between bond's yield and any other security yield having same
maturities is considered as
1. maturity spread
2. bond spread
3. yield spread
4. interest spread
Answer B
MCQ: Protective covenant devised in market to reduce event risk and to control debt
cost is classified as
1. super poison covenant

2. super poison put
3. super poison call
4. super poison redemption
Answer B
MCQ: Coupon rate of convertible bond is
1. higher
2. lower
3. variable
4. stable
Answer B

MCQ: Rate denoted as r* is best classified as
1. real risk-free interest rate

2. real-risk free nominal rate
3. real-risk free quoted rate
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4. real-risk free nominal premium
Answer A
MCQ: An outstanding bonds are also classified as
1. standing bonds
2. outdated bonds
3. dated bonds
4. seasoned bonds
Answer D
MCQ: An inflation rate includes in bond's interest rates is one which is inflation rate
1. at bond issuance
2. expected in future
3. expected at time of maturity
4. expected at deferred call
Answer B
MCQ: A premium charged by lenders for securities that cannot be converted into cash
is classified as
1. required premium
2. liquidity premium
3. marketability premium
4. Both B and C
Answer D
MCQ: An unsecured bond that provides no lien against property as security for bond
obligation is classified as
1. secured bond
2. debenture
3. obligation bond
4. specific bond
Answer B

MCQ: Unsecured bonds which is designated for only notes payable or all other debts
are classified as
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1. designated bonds
2. payable bonds
3. ordinate bonds
4. subordinated bonds
Answer D
MCQ: A market interest rate for specific type of bond is classified as bond's
1. required rate of return

2. required option
3. required rate of redemption
4. required rate of earning
Answer A
MCQ: Bond which is issued in market and few days are passed of its issuance is
classified as
1. instable bond
2. outstanding bond
3. standing bond
4. stable bond
Answer B
MCQ: Real risk-free rate is applicable when it is expected that there will be
1. high inflation
2. low inflation
3. no inflation
4. none of above
Answer D
MCQ: Bonds that do not pay original coupon payment but payment is made from
additional bonds are classified as
1. payment in-kind bonds

2. payment off-kind bonds
3. kind payment
4. additional bond
Answer A

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MCQ: According to top rating agencies S&P double-B and other lower grade bonds are
classified as
1. development bonds
2. junk bonds
3. compounded bonds
4. discounted bonds
Answer B
MCQ: Bond call provision that is not practiced even after several years of issuance is
classified as
1. original provision
2. deferred call
3. deferred provision
4. permanent provision
Answer B
MCQ: Price of an outstanding bond increases when market rate
1. never changes
2. increases
3. decreases
4. earned
Answer C
MCQ: An average inflation rate which is expected over life of security is classified as
1. inflation premium
2. off season premium
3. nominal premium
4. required premium
Answer A
MCQ: Type of bond which pays interest payment only when it earns is classified as
1. income bond
2. interest bond
3. payment bond
4. earning bond
Answer A
8
MCQ: Type of bonds that pays no coupon payment but provides little appreciation are
classified as
1. depreciated bond
2. interest bond
3. zero coupon bond
4. appreciation bond
Answer C
MCQ: In call provision, it is stated that company will pay to issue an amount
1. higher than par value

2. lower than par value
3. equal to par value
4. zero to par value
Answer A
MCQ: If coupon rate is less than going rate of interest then bond will be sold

4. at par value
Answer B
MCQ: Type of provision which allows an orderly retirement of an issued bond which is
classified as
1. whole call provision

2. super fund provision
3. floating fund provision
4. sinking fund provision
Answer D
MCQ: Bonds issued by small companies tend to have
1. high liquidity premium

2. high inflation premium
3. high default premium
4. high yield premium
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Answer A

MCQ: An interest yield = 7.9% and capital gains yield = 2.5% then total rate of return is
1. 10%
2. 3.16%
3. 0.31%
4. 5.40%
Answer A
MCQ: Stated value of bonds or face value is considered as
1. state value
2. par value
3. bond value
4. per value
Answer B
MCQ: Type of bond in which payments are made on basis of inflation index is classified
as
1. borrowed bond
2. purchasing power bond
3. surplus bond
4. deficit bond
Answer B
MCQ: An bond whose price will rise above its face value is classified as
1. premium face value

2. premium bond
3. premium stock
4. premium warrants
Answer B
MCQ: Coupon rate of bond is also called
1. nominal rate
2. premium rate
3. quoted rate
10
4. both a and c
Answer D

MCQ: Bond's promised rate of return is also considered as
1. yield to earning
2. yield to investors
3. yield to maturity
4. yield to return
Answer C
MCQ: A premium which reflects possibility of issuer who does not pay principal amount
of bonds is called
1. seasoned risk premium

2. nominal risk premium
3. default risk premium
4. quoted risk premium
Answer C
MCQ: Real risk-free interest rate in addition with an inflation premium is equal to
1. required interest rate

2. quoted risk-free interest rate
3. liquidity risk-free interest rate
4. premium risk-free interest rate
Answer B
MCQ: An increasing in interest rate leads to decline in value of
1. junk bonds
2. outstanding bonds
3. standing bonds
4. premium bonds
Answer B
MCQ: Bonds issued by government and backed by U.S government are classified as
1. issued security
11
2. treasury bonds
3. U.S bonds
4. return security

MCQ: Legal document in which rights of issuing corporation and bondholders state is
classified as
1. legal rights classification

2. indenture
3. ownership statement
4. guarantee statement
Answer B
MCQ: Price of an outstanding bond decreases when market rate is
1. increased
2. decreased
3. earned
4. never changed
Answer A
MCQ: Rate of interest which is usually discussed by investors whenever rate of return is
discussed is classified as
2. yield to return
3. yield to earning
Answer A
MCQ: Tax free bonds issue for welfare by industrial agencies or pollution control
agencies are classified as
1. agent bonds
2. development bonds
3. pollution control bonds
4. Both B and C
Answer D
12
MCQ: Value generally promises to pay at maturity date and a firm borrows is
considered as bond's
1. bond value
2. per value
3. state value
4. par value
Answer

MCQ: Maturity date decides at time of issuance of bond and legally permissible is
classified as
1. original maturity
2. permanent maturity
3. artificial maturity
4. valued maturity
Answer A
MCQ: Bonds with deferred call have protection which is classified as
1. provision protection
2. provision protection
3. deferred protection
4. call protection
Answer D
MCQ: Bonds issued by local and state governments with default risk are
1. municipal bonds
2. corporation bonds
3. default bonds
4. zero bonds
Answer A
MCQ: Indexed bonds that are issued by linking payments to inflation are classified as
1. treasury inflation protected securities

2. premium protected securities
3. risk protected securities
4. liquidity protected securities
13
Answer A
MCQ: Bonds having zero default risk are classified as
1. U.S bonds
2. return security
3. issued security
4. treasury bonds
Answer D

MCQ: Right held with corporations to call issued bonds for redemption is considered as
1. artificial provision
2. call provision
3. redeem provision
4. original provision
Answer B
MCQ: Bond that has been issued in very recent timing is classified as
1. mature issue
2. earning issue
3. new issue
4. recent issue
Answer C
MCQ: Type of options that permit bond holder to buy stocks at stated price are
classified as
1. provision
2. guarantee
3. warrants
4. convertibles
Answer C
MCQ: When price of bond is calculated below its par value, it is classified as
1. classified bond
2. discount bond
3. compound bond
14
4. consideration earning
Answer B
MCQ: Required rate of return in calculating bond's cashflow is also classified as
1. going rate of return

2. yield
3. earning rate
4. Both A and B
Answer D

MCQ: An interest rate which is used in calculation of cash flows of bonds is called
1. required rate of redemption

2. required rate of earning
3. required rate of return
4. required option
Answer C
MCQ: According to top rating agencies S&P triple-A and double-A rating bonds are
classified as an
1. extremely discounted
2. extremely safe
3. extremely risky
4. extremely inflated
Answer B
MCQ: Rate on debt that increases as soon market rises is classified as
1. rising bet rate

2. floating rate debt
3. market rate debt
4. stable debt rate
Answer B
MCQ: If market interest rate rises above coupon rate then bond will be sold
1. equal to return rate
15
2. seasoned price
4. above its par value
Answer C
MCQ: Bonds that can be converted into shares of common stock are classified as
1. convertible bonds
2. stock bonds
3. shared bonds
4. common bonds
Answer A

MCQ: Type of bonds that are issued by foreign governments or foreign corporations are
classified as
1. zero risk bonds

2. zero bonds
3. foreign bonds
4. government bonds
Answer C
MCQ: Specific day at which bond value is repaid can be considered as
1. valued date
2. repayment date
3. payment date
4. maturity date
Answer D
MCQ: An usage of proceeds of new issue to retire issue with high-rate is classified as
1. refunding operation
2. funding operation
3. proceeds operation
4. deferred operation
Answer A
MCQ: If default probability is zero and bond is not called then yield to maturity is
16
1. mature expected return rate
2. lower than expected return rate
3. higher than expected return rate
4. equal to expected return rate
Answer D
MCQ: Rate of return (in percentages) consists of
1. capital gain yield interest yield

2. return yield + stable yield
3. return yield + instable yield
4. par value + market value
Answer A

MCQ: Reinvestment risk of bond's is usually higher on
1. income bonds
2. callable bonds
3. premium bonds
4. default free bonds
Answer B
MCQ: If market interest rate fells below coupon rate then bond will be sold

2. above its par value
3. equal to return rate
4. seasoned price
Answer B
MCQ: Yield of interest rate which is below than coupon rate, this yield is classified as
2. yield to call
3. yield to earning
Answer B
MCQ: An inflation rate including in quoted interest rate on security, is inflation rate
17
1. expected over security life
2. expected at deferred call
3. at bond issuance
4. expected at time of maturity
Answer A
MCQ: Market in which bonds are traded over-the-counter than in an organized

exchange is classified as
1. organized markets
2. trade markets
3. counter markets
4. bond markets
Answer D

MCQ: Coupon payment is calculated with help of interest rate, then this rate considers
as
1. payment interest
2. par interest
3. coupon interest
4. yearly interest rate
Answer C
MCQ: An effect of interest rate risk and investment risk on a bond's yield is classified as
1. reinvestment premium
2. investment risk premium
3. maturity risk premium
4. defaulter's premium
Answer C
MCQ: Coupon payment of bond which is fixed at time of issuance
1. remains same
2. becomes stable
3. becomes change
4. becomes low
Answer A
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MCQ on Bonds and Bond Valuation - Test 1

MCQ: Second mortgages pledged against

MCQ on Bonds and Bond Valuation - Test 2

MCQ: Reinvestment risk of bond's is higher on

1. short maturity bonds

MCQ: Bond which is offered below its face value is classified as

1. present value bond

MCQ on Bonds and Bond Valuation - Test 3

MCQ: Payment divided by par value is classified as

MCQ: An annual interest payment divided by current price of bond is considered as

MCQ on Bonds and Bond Valuation - Test 4

1. more than its par value

1. super refund provision

1. super poison covenant

MCQ: Coupon rate of convertible bond is

MCQ on Bonds and Bond Valuation - Test 5

1. real risk-free interest rate

MCQ: An outstanding bonds are also classified as

MCQ on Bonds and Bond Valuation - Test 6

1. required rate of return

1. payment in-kind bonds

MCQ on Bonds and Bond Valuation - Test 7

MCQ: Price of an outstanding bond increases when market rate

1. higher than par value

1. seasoned par value

1. whole call provision

MCQ: Bonds issued by small companies tend to have

1. high liquidity premium

MCQ on Bonds and Bond Valuation - Test 9

MCQ: Stated value of bonds or face value is considered as

1. premium face value

MCQ: Coupon rate of bond is also called

MCQ on Bonds and Bond Valuation - Test 10

1. seasoned risk premium

1. required interest rate

MCQ: An increasing in interest rate leads to decline in value of

MCQ on Bonds and Bond Valuation - Test 11

1. legal rights classification

MCQ: Price of an outstanding bond decreases when market rate is

MCQ on Bonds and Bond Valuation - Test 12

MCQ: Bonds with deferred call have protection which is classified as

1. treasury inflation protected securities

MCQ: Bonds having zero default risk are classified as

MCQ on Bonds and Bond Valuation - Test 13

MCQ: Required rate of return in calculating bond's cashflow is also classified as

1. going rate of return

MCQ on Bonds and Bond Valuation - Test 14

1. required rate of redemption

MCQ: Rate on debt that increases as soon market rises is classified as

1. rising bet rate

1. equal to return rate

MCQ on Bonds and Bond Valuation - Test 15

1. zero risk bonds

MCQ: Specific day at which bond value is repaid can be considered as

MCQ: Rate of return (in percentages) consists of

1. capital gain yield interest yield

MCQ on Bonds and Bond Valuation - Test 16

1. below its par value

MCQ: Market in which bonds are traded over-the-counter than in an organized

MCQ on Bonds and Bond Valuation - Test 17

MCQ: Coupon payment of bond which is fixed at time of issuance

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