Question

1. The structure of repayment for most long-term bonds consists of

	a.	fixed coupon payments every year until maturity.
	b.	interest payments that vary by the yield to maturity each year.
	c.	fixed coupon payments each year plus the face value or par value at maturity.
	d.	converted payments from interest to dividends halfway to the bond's maturity.
	e.	a balloon payment at maturity.

2.

For eligible individuals, Classic IRAs are

	a.	tax deferred, taxed on the contributions but tax deductible upon withdrawal.
	b.	tax deferred, tax deductible on the contributions but taxed upon withdrawal.
	c.	tax exempt on the contributions, but taxed on the withdrawals.
	d.	taxed on the contributions, but tax exempt on the withdrawals.
	e.	tax exempt on the contributions and the withdrawals.

Answer 1

Answer to Q#1 (First question in the list): Option-(c): fixed coupon payments each year plus the face value or par value at maturity. Reason: Corporations issue debt instruments to raise fund for their operation or capital investment plans or business expansion plans, etc. These instruments are issued to public at large by the corporations that raises funds. One of the most commonly issued debt instruments is the bonds. Bond is a debt instrument that is designed in such a way that the bondholders are entitled to receive periodic coupon payment at the coupon rate mentioned on bond instrument commencing from the period next to the date of issue till maturity of the bonds. Also, the corporation that collected cash from public through bond issues must repay it at maturity either by paying an amount equals to face value of the bonds issued or more than the face value of the bonds or less than face value of the bonds, as sentenced in the debt instrument. Periodic coupon payment may be monthly or quarterly or half-yearly or annually. If the coupon payment type is annually, the bondholders will receive coupon interest, calculated by multiplying bonds' face value by annual coupon rate worded on bonds. Also, bondholders will be entitled to collect the face value or par value of the bonds at the maturity date from the corporations. Therefore, option-(c) is the correct answer.