QUESTION 1

  1. You own a corporate bond which is yielding 8.2 percent. What is your after-tax yield if your marginal tax rate is 28 percent?
    5.90 percent
    7.52 percent
    8.20 percent
    10.58 percent
    11.55 percent

0.5 points

QUESTION 2

  1. Which one of the following features of corporate bonds has the greatest appeal to pension fund investors?
    call provision
    convertible provision
    zero repayment risk
    prospectus availability
    predictable cash flows

0.5 points

QUESTION 3

  1. Which one of the following is a taxable municipal bond used to finance a facility used by a private business?
    private activity bond
    private revenue bond
    private corporate bond
    private agency bond
    private income bond

0.5 points

QUESTION 4

  1. Which one of the following parties is the largest holder of U.S. corporate bonds?
    pension funds
    life insurance companies
    banks
    foreign investors
    individual investors

0.5 points

QUESTION 5

  1. Laura has an average tax rate of 22 percent and a marginal tax rate of 28 percent. What is her after-tax yield on a corporate bond which has a 6.7 percent yield?
    4.82 percent
    5.09 percent
    5.47 percent
    6.00 percent
    11.34 percent

0.5 points

QUESTION 6

  1. Which one of the following is an account used to provide for scheduled redemptions of outstanding bonds?
    redemption fund
    sinking fund
    liquidation account
    serial account
    callable account