Question

50) Corporations use bonds A) When it is difficult to sell stock B) For financing ongoing business activities. C To improve financial leverage. D) All of these are correct. E) None of these is correct. 51) A bond that is repaid from the income generated by the project it is designed to finance is 51)_ called a(n) A) Treasury bill. B) General obligation bond. C) Savings bond. D) Agency bond. E) Revenue bond. 52) A U.S. govermment security issued in minimum units of $100 with a 30-year maturity is 52) called a A) Treasury note. B) Subordinated bond. ) Savings bond. D) Treasury bill. E) Treasury bond. 53) A discounted security means that the actual purchase price is A) Less than the maturity value. B) Greater than the face value. C) The expected interest rate. D) The face value. E) The value at maturity. 54) Which of the following investments typically has the most risk? 54) A) Stocks B) Cash C) Government bonds D) Cash equivalents E) Certificates of deposit 55) A fancy way of saying you need to diversify your investments is 55) A) Don't judge a book by its cover. B) Don't put all of your eggs in one basket. C) A bird in the hand is worth two in the bush. D) Birds of a feather flock together. E) A stitch in time saves nine.

Answer 1

50) Options A B And C are all the objectives of issuing bonds therefore option D is correct which states that all of these are correct reasons for issuing bonds

51) A revenue bond is a variant of municipal bond the repayment of which is made only from revenues generated by the revenue generated by the project which it finances. So E is the correct option

52) US government securities are called Treasury securities so options B and C are eliminated among tbond note and bill the major difference is of maturity. Tbill have a maturity of one year or less, Treasury notes have maturities from 2 to 10 years. Treasury bonds have maturities of 10 to 30 years. Treasury securities require a minimum investment of $100 so T bond fits the description given here So E is the correct option

53) Securities can be issued at a premium or at discount or even at par, when issued at premium the purchase price is higher than the maturity value, while when issued at discount the purchase price is lower than the maturity value, while when issued at par, the purchase price is same as the maturity value so A is the correct option.

54) Cash and cash equivalents are not risky at all as they are or can be converted to cash quickly. Bonds and CD are fixed income securities so they also bear very less risk. But stocks receive dividends only when companies make profit therefore these are the riskiest security so A is the correct option.

55) Diversification means that you invest in securities which are not very highly correlated or are even negatively correlated so that when one security doesn't perform well, then the others compensate for the loss of return. Therefore dont put all your eggs in one basket is what fits this description so B is the correct option.