1

1. You own a corporate bond which is yielding 8.2 percent. What is your after-tax yield if your marginal tax rate is 28 percent?

   5.90 percent

   7.52 percent

   8.20 percent

   10.58 percent

   11.55 percent

0.5 points

QUESTION 2

1. Which one of the following features of corporate bonds has the greatest appeal to pension fund investors?

   call provision

   convertible provision

   zero repayment risk

   prospectus availability

   predictable cash flows

0.5 points

QUESTION 3

1. Which one of the following is a taxable municipal bond used to finance a facility used by a private business?

   private activity bond

   private revenue bond

   private corporate bond

   private agency bond

   private income bond

0.5 points

QUESTION 4

1. Which one of the following parties is the largest holder of U.S. corporate bonds?

   pension funds

   life insurance companies

   banks

   foreign investors

   individual investors

0.5 points

QUESTION 5

1. Laura has an average tax rate of 22 percent and a marginal tax rate of 28 percent. What is her after-tax yield on a corporate bond which has a 6.7 percent yield?

   4.82 percent

   5.09 percent

   5.47 percent

   6.00 percent

   11.34 percent

0.5 points

QUESTION 6

1. Which one of the following is an account used to provide for scheduled redemptions of outstanding bonds?

   redemption fund

   sinking fund

   liquidation account

   serial account

   callable account