Bond Market Jargon Quiz

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What does it mean when a $100 face value bond sells for $110 in the market?

The bond is selling at a discount because the market expects high inflation.

The bond is selling at a premium because the market expects low inflation.

The bond is selling at a discount because the market expects low inflation.

The bond is selling at a premium because the market expects high inflation. (correct)

In the context of Corporate Bonds, what distinguishes First Mortgage Bonds from Second Mortgage Bonds?

Second Mortgage bonds are unsecured debt.

First Mortgage bonds have the first claim to the assets. (correct)

First Mortgage bonds are paid after all Second Mortgage bonds are repaid.

Second Mortgage bonds have specific assets as collateral.

What determines the credit ratings or worthiness of Corporate Debentures?

Market expectations of inflation.

The face value of the debenture.

Company's cash flow and unencumbered assets. (correct)

The company's stock price.

What is the characteristic of Subordinated Debentures compared to other forms of debt?

They are ranked behind other forms of debt for repayment. Signup and view all the answers

What happens to a corporation's Commercial Paper when it is guaranteed by a bank?

It becomes a Banker's Acceptance. Signup and view all the answers

How do Strip Bonds differ from traditional corporate debt instruments?

Strip Bonds involve separating the principal and interest payments of a bond. Signup and view all the answers

What is the premium or discount for bonds that are priced at $90 per $100 of face value?

The bond is priced at a discount Signup and view all the answers

Which type of bonds have maturities ranging from 5 to 10 years?

Medium-term bonds Signup and view all the answers

What type of bond has a coupon rate that adjusts periodically based on market rates?

Floating-rate bond Signup and view all the answers

Which of the following bond features allows the issuer to repurchase the bond before the maturity date?

Callable bonds Signup and view all the answers

What type of interest income are price changes considered for tax purposes?

Interest income Signup and view all the answers

Which of the following statements is true regarding the bond market and the equity market?

The bond market is larger than the equity market Signup and view all the answers

What is the usual par or face value of a bond?

$100 Signup and view all the answers

What does it mean when a bond is sold at a discount?

The bond is sold for less than its face value. Signup and view all the answers

What is the difference between a bond and a debenture?

A bond is secured by specific assets, while a debenture is unsecured. Signup and view all the answers

What does it mean when a bond is sold at a premium?

The bond is sold for more than its face value. Signup and view all the answers

What is a bond coupon rate?

The amount of interest paid on a bond. Signup and view all the answers

What is bond maturity?

The remaining time until a bond's principal is repaid. Signup and view all the answers

Bond Market Jargon Quiz

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