1. ________________ is an account into which periodic payments are made for the purpose of retiring a bond issue. A. An indenture B. A debenture C. A covenant D. A sinking fund

7. A stripped bond: A. pays coupons at regular intervals until maturity. B. typically sells at a premium from its face value. C. pays no coupons, thus it sells at a deep discount from face value. D. decreases in value when interest rates decrease.

12. A financial market is ____________ if it is possible to easily observe its prices and trading volume. A. transparent B. ordered C. in equilibrium D. chaotic

13. Interest rates or rates of return on investment that have not been adjusted for the effects of inflation are called: A. Coupon rates. B. Stripped rates. C. Effective rates. D. Nominal rates.

19. The face value of a bond: A. Is defined as the current market price. B. Includes the principal plus the total interest due. C Is the principal amount paid at maturity. D. Is defined as the principal amount minus the interest due at maturity.

20. The rate that is computed by dividing the annual interest payment by the face value of a bond is called the: A. discount rate. B. coupon rate. C. yield to call. D. market rate.