Chapter 7 Exam Questions With Verified
Answers
What do fixed income securities consist of? - answerdebit instruments and preferred stock
What is a bond? - answera debt security in which a borrower promises to pay a specified
interest rate and principal at a future date.
_______________________...
What do fixed income securities consist of? - answer✔debit instruments and preferred stock
What is a bond? - answer✔a debt security in which a borrower promises to pay a specified
interest rate and principal at a future date.
_______________________ are not completely risk-less, since their prices will decline when the
interest rate rises - answer✔treasury bonds
What is a treasury bond? - answer✔a marketable, fixed-interest U.S. government debt security
with a maturity of more than 10 years.
What is a municipal bond? - answer✔loans investors make to local governments. They are issued
by cities, states, counties, or other local governments.
What is a corporate bond? - answer✔a bond issued by a corporation in order to raise financing
for a variety of reasons such as to ongoing operations, M&A, or to expand business.
Describe par value? - answer✔refers to a bonds face value and the amount of money that the
issuing entity borrows and promises to repay on the maturity date
Describe "default" - answer✔a bond issuer is said to be in default if it does not pay the interest or
the principal in accordance with the terms of the indenture agreement or if it violates one or more
of the issuers restrictive covenants
What is an indenture? - answer✔the contract that describes the terms of a borrowing
arrangement between a firm that sells a bond issue and the investors who purchase the bond
What is a convertibility provision? - answer✔allows a bondholder or preferred stockholder to
convert their bond or preferred share, respectively, into a specified number or value of common
shares.
What is a floating rate bond? - answer✔a bond for which the interest rate changes based on a
benchmark interest rate
The benefits of buying summaries with Stuvia:
Guaranteed quality through customer reviews
Stuvia customers have reviewed more than 700,000 summaries. This how you know that you are buying the best documents.
Quick and easy check-out
You can quickly pay through credit card or Stuvia-credit for the summaries. There is no membership needed.
Focus on what matters
Your fellow students write the study notes themselves, which is why the documents are always reliable and up-to-date. This ensures you quickly get to the core!
Frequently asked questions
What do I get when I buy this document?
You get a PDF, available immediately after your purchase. The purchased document is accessible anytime, anywhere and indefinitely through your profile.
Satisfaction guarantee: how does it work?
Our satisfaction guarantee ensures that you always find a study document that suits you well. You fill out a form, and our customer service team takes care of the rest.
Who am I buying these notes from?
Stuvia is a marketplace, so you are not buying this document from us, but from seller Brainbarter. Stuvia facilitates payment to the seller.
Will I be stuck with a subscription?
No, you only buy these notes for $10.49. You're not tied to anything after your purchase.
