FIN 3716 LSU Examination/ WITH 100% CORRECT ANSWERS

FIN 3716 LSU Examination The coupon value of a bond is the face value of the bond. - FALSE A bond is said to mature on the date when the issuer repays its notional value. - TRUE Which of the following best ill ...

FIN 3716 LSU Examination The coupon value of a bond is the face value of the bond. - FALSE A bond is said to mature on the date when the issuer repays its notional value. - TRUE Which of the following best illustrates why a bond is a type of loan? A) The issuers of bonds make regular payments to bondholders. B) When a company issues a bond, the buyer of that bond becomes an owner of the issuing company. C) Funds raised are used to finance long-term projects. D) When an investor buys a bond from an issuer, the investor is giving money to the issuer, with the assurance that it will be repaid at a date in the future. - D Which of the following statements regarding bonds and their terms is FALSE? A) Bonds are securities sold by governments and corporations to raise money from investors today in exchange for a promised future payment. B) By convention, the coupon rate is expressed as an effective annual rate. C) Bonds typically make two types of payments to their holders. D) The time remaining until the repayment date is known as the term of the bond. - B A bond certificate includes ________. A) the terms of the bond B) the individual to whom payments will be made C) the yield to maturity of the bond D) the price of the bond - A Which of the following is true about the face value of a bond? A) It is the notional amount we use to compute coupon payments. B) It is the amount that is repaid at maturity. C) It is usually denominated in standard increments, such as $1,000. D) All of the above are true. - D The only cash payment an investor in a zero-coupon bond receives is the face value of the bond on its maturity date. - TRUE Prior to its maturity date, the price of a zero-coupon bond is its face value. - FALSE How are investors in zero-coupon bonds compensated for making such an investment? A) Such bonds are purchased at their face value and sold at a premium on a later date. B) Such bonds make regular interest payments. C) Such bonds are purchased at a discount, below their face value. D) Such bonds have a lower face value as compared to other bonds of similar term. - C Why is the yield to maturity of a zero-coupon, risk-free bond that matures at the end of a given period the risk-free interest rate for that period?