Question

1. Which of the following is an advantage of convertible bonds?

   		Investors can convert the bonds into higher coupon ratebonds.
   		Investors can choose to hold the company's bonds or convert thebonds into its stock.
   		Investors are paid a penalty on the conversion of the bonds.
   		Investors are redeemed for the difference between the face valueand the market price on redemption of the bonds.
   		Investors can claim interest for the remaining life of the bondson the bonds' early conversion.

5 points

QUESTION 2

1. If the Federal Reserve loosens money supply then:

   		inflation will decrease.
   		interest rates will decrease.
   		sale of Treasury securities will increase.
   		credit supply will decrease.
   		economic activity will decrease.

5 points

QUESTION 3

1. A bond purchased for $950 was sold for $980 after one year. Theinterest received during the year is $25. The bond's yield is:

   		2.23%
   		5.79%
   		8.12%
   		5.25%
   		9.36%

5 points

QUESTION 4

1. Investors with a _____ will demand a higher rate of return.

   		higher time preference for consumption
   		lower exposure to economic risks
   		lower access to production opportunities
   		higher financial creditworthiness
   		lower default premium