1. A(n)________ is used to outline the issuing company's contractual obligations to bondholders.

a.

mortgage

b.

bond rating

c.

debenture

d.

indenture

2. Which of the following risks do debt ratings specifically attempt to assess?

a.

liquidity risk

b.

call risk

c.

default risk

d.

interest rate risk

3.

A government bond issued in Germany has a coupon rate of 5%, a face value of 1.000 euros, and matures in six years. The bond pays annual interest payments. Calculate the price of the bond (in euros) if the yield to maturity is 3.5%.

a.

923.86

b.

1.050

c.

1.079,93

d.

1.000

4.

Terminator Bug Company bonds have an annual 14% coupon rate. Interest is paid semiannually. The bonds have a par value of $1,000 and will mature 10 years from now. Compute the value of Terminator bonds if investors' required rate of return is 12% (annual rate)

a.

$1,149.39

b.

$894.06

c.

$1,000.00

d.

$1,114.70