1. What is the definition of a bond? a. Why do companies issue bonds? 2. What is a coupon rate and what does it represent? 3. Explain how periodic interest payments determined with a bond. 4. What is meant by Par Value? a. Is Par Value the same as Market Value 5. What factors determine a bond rating and why is this important? 6. Will a company with a AAA bond rating pay a higher interest rate on its bonds than a company with BBB rating? Why or Why not? 7. An example of an asset that is unsecured is: A. a bond backed by credit card receivables B. a debenture C. equipment certificate D. all the above 8. Why might a firm want to maintain a high bond credit rating? 9. How does the bond rating affect an investors required rate of return? 10. In an investment portfolio explain how bonds diversify the portfolio. 11. When the market interest rate is above the coupon rate for a particular quality of bond, the bond will be priced: A. below its par value B. at is par value C. above its par value D. The bond price cannot be determined 12. Which of the following statements concerning bonds and risk is true? A. Because the interest payments and maturing value are known, the only risk associated with investing in bonds is default risk. B. Zero coupon bonds are always more risky than bonds with high coupon rates because of the time value of money. C. Bonds are generally less risky than common stock because of the preference for debt over equity in the event of bankruptcy and liquidation. D. B-rated bonds are above average for risk, i.e., less risky than the average bond. 13. You want to invest in bonds. Explain whether or not each provision listed will make the bonds more or less desirable as an investment: call provision