FIN 320 – Chapter 6

When you refer to a bond’s coupon, you are referring to which one of the following?

Annual interest payment

What is the principal amount of a bond that is repaid at the end of the loan term
called?

Face value

The annual interest divided by the face value of a bond is referred to as the:

coupon rate

On which one of the following dates is the principal amount of a bond repaid?

Maturity date

Which one of the following terms refers to a bond’s rate of return that is required by the marketplace?

Yield to maturity

The current yield on a bond is equal to the annual interest divided by which one of the following?

Current market price

The written agreement that contains the
specific details related to a bond issue is called the bond:

indenture

A registered form bond is defined as a bond that:

pays coupon payments directly to the owner of record.

This morning, Jeff found a bond certificate lying on the floor of a bank. He picked it up and noticed
that the bond matured today. He presented the bond to the bank teller and receive
d both the principal
and interest payment. The bond that Jeff found must have been which one of the following?

Bearer form bond

Miller Farm Products is issuing a 15-year, unsecured bond. Based on this information, you
know that
this debt can be described as a:

debenture

A note is a(n):

unsecured debt that is generally payable within the next 10 years

What term is used to describe an account that a bond trustee manages for the sole purpose of
redeeming bonds early?

Sinking fund

A call provision grants the bond issuer the:

option of repurchasing the bonds prior to maturity at a prespecified price.

The call premium is the amount by which the:

call price exceeds the par value.

Dexter, Inc. has a bond issue
outstanding. The issue’s indenture provision prohibits the firm from
redeeming the bonds during the first three years. This provision is referred to as the _____ provision.

deferred call

Travis recently purchased a callable bond. However, that bond cannot be currently redeemed by the issuer. Thus, the bond must currently be:

call protected

A protective covenant:

limits the actions of the borrower.

Manning, Inc. originally issued bonds that were rated investment grade. These bonds have now been
downgraded to junk status. Which one of the following terms applies to this situation?

Fallen angel

Which one of the following terms applies to a bond that initially sells at a deep discount and pays no
interest payments?

Zero coupon

The price at which a dealer will purchase a bond is called the _____ price.

bid price

The price at
which an investor can purchase a bond from a dealer is called the _____ price.

asked price

A bond trader just purchased and resold a bond. The amount of profit earned by the trader from this
purchase and resale is referred to as the:

bid-ask spread

Which one of the following is the quoted price of a bond?

Clean price

Which one of the following is the price that an investor pays to purchase an outstanding bond?

Dirty price