CFIN CHAPTER 6 EXAM QUESTIONS WITH CORRECT DETAILED ANSWERS – UPDATED!!
government bonds - Answer-long term debt, debt issued by a federal, state, or local gov't
municipal bonds - Answer-long term debt, bonds issued by a state or local government
corporate bonds - Answer-long term debt, b...
government bonds - Answer-long term debt, debt issued by a federal, state, or local
gov't
municipal bonds - Answer-long term debt, bonds issued by a state or local government
corporate bonds - Answer-long term debt, bonds issued by corporations
mortgage bond - Answer-long term debt, bond backed by tangible assets, first mortgage
bonds are senior in priority to second mortgage bonds
debenture - Answer-long term debt, bond that is not secured by a mortgage on specific
property
subordinated debenture - Answer-long term debt, bond which in the event of liquidation,
has a claim on assets only after the senior debt has been paid off
income bond - Answer-long term debt, bond that pays interest to the holder only if the
interest is earned by the firm
putable bond - Answer-long term debt, bond that can be redeemed at the bondholder's
option when certain circumstances exist
indexed (purchasing power) bond - Answer-long term debt, bond that has interest
payments based on an inflation index to protect the holder from loss of purchasing
power
floating rate bond - Answer-long term debt, bond whose interest rate fluctuates with
shifts in the general level of interest rates
zero coupon bond - Answer-long term debt, bond that pays no annual interest but sells
at a discoutn below par, shus providing compensation to investors in the form of capital
appreciation
junk bond - Answer-long term debt, high risk/high hield bond used to finance mergers,
leveraged buyouts, troubled companies
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