Finance Quizes CH 6

The riskiness of publicly traded bond issues is rated by independent agencies. According to Moody’s rating system, an Aaa bond and a Caa bond are ________ and ________ respectively. prime quality; speculative
A(n) ________ is secured by real estate. mortgage bond
The size of a loan and its issuance costs (as a percentage of the amount borrowed) are ________. inversely related
A(n) ________ is a graphic depiction between the maturity and rate of return for bonds with similar risks. yield curve
The yield curve in an economic period where higher future inflation is expected would be ________. upward-sloping Corr
________ are secured by stock and/or bonds that are owned by the issuer. Collateral trust bonds
The ________ feature allows bondholders to change each bond into stated number of shares of stock. conversion
A bond rated AAA according to Moody’s, is considered ________. a prime quality bond
The purpose of the restrictive debt covenant that prohibits the sale of accounts receivable is to ________. limit the realization of current assets to cash
Which of the following affects the slope of yield curve? liquidity preferences
The ___ is the compound annual rate of interest earned on a debt security, purchased, and held to maturity yield to maturity
____ are secured by stocks and or bonds that are owned by the issuer collateral trust bonds
If the required return rate is less than the compound rate, a bond will sell at _____ a premium
A bond AAA according to moody’s is considered ____ A premium Quantity Bond
A(n) ___is issued with no or very low coupon rate or below its par value. Zero or low coupon bond
The yield curve in an economic period where higher future inflation is expected would be _____ Upward Sloping
The purpose of the debt covenant that requires maintaining a minimum level of net worth capital to ____ ensure a cash shortage does not cause an inability to meet current obligations
The value of the bond is the present value of the ____ interest payments and maturity value
Bonds are ___ long term debt instruments to raise large sums of capital
A debenture is a _____ a second bond that only credit worthy firms can issue

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