Bond Definition Quiz
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Questions and Answers

What is the primary factor that determines a bond’s value?

  • The par value of the bond (correct)
  • The coupon rate of the bond
  • The risk of the bond, or financial stability of the issuer
  • The maturity of the bond

    • When is a bond in default?

  • When the issuer fails to give the bond a rating
  • When the issuer has a low credit rating
  • When the issuer publicizes the rating of the bond
  • When the issuer has not kept up with the interest or other required payments (correct)

    • What are the three main components of a bond?

  • Par value, maturity, beneficiary
  • Par value, coupon rate, beneficiary
  • Par value, maturity, coupon rate (correct)
  • Par value, coupon rate, IRAs

    • A bond’s annual coupon interest divided by the purchase price of the bond is equal to its

    <p>Maturity</p> Signup and view all the answers

    What types of bonds are issued by state and local governments?

    <p>Municipal bonds</p> Signup and view all the answers

    What is the difference between capital markets and money markets?

    <p>Financial capital in capital markets is loaned and/or borrowed for more than one year. Financial capital in money markets is loaned and/or borrowed for one year or less.</p> Signup and view all the answers

    In a primary market, only the original issuer can sell or repurchase a financial asset.

    <p>TRUE</p> Signup and view all the answers

    In general, which bond would pay a higher interest rate on your investment: a Treasury bond or a junk bond?

    <p>Junk bond</p> Signup and view all the answers

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