Question 1 This is a 2-part question: You're in the cafeteria with two colleagues, Jessica and Kim. Kim is Asian. Jessica sees Kim's phone background. It is a picture of her husband. Jessica says, "Oooh, your husband is white? He's good-looking! You two should have lots of babies... half-Asian babies are the cutest." At the same time, you are 100 percent certain that interest rates are going to go down. Your client tells you to act on it in no uncertain terms. He request you put trades on that will be profitable if interest rates go down. You should: O buy bonds, and tell Jessica that Kim might have felt uncomfortable with comments about appearance and race. O sell bonds, and tell Jessica not to be a racist pig O sell bonds, and agree with Jessica - half Asian kids are the best! O buy bonds, and not intervene in the conversation between Kim and Jessica Question 2 Using the calculator we created in class (if necessary, here is the link ), a single 10-year bond with a 5% coupon rate and a $1000 face value was issued when market rates were 4%. What were the proceeds to the issuer? O $1081 O 1096 O 1000 Question 3 Why do investors buy junk bonds? O higher yield 1 pts O higher coupon Olonger maturity 1 pts 1 pts Question 4 What happens if a bond issuer trips a covenant? O repayment O forgiveness is offered O interest not paid Question 5 Princess Diana was on vacation in Europe. She was kidnapped and held hostage. The kidnappers asked for a ransom. What kind of bonds might be needed to deal with this kidnapper? O Bearer bonds O Eurobonds accelerated O Convertible bonds Question 6 What is a fully-amortized bond? O A bond that returns both principal and interest with every payment O A bond that is amortized instead of depreciated O A bond that flows through an amortization table 1 pts 1 pts 1 pts Question 7 Why do callable bonds benefit the issuer? O The issuer can lower their interest expense The issuer can get all their money back O The issuer can extend the bond's maturity Question 8 GM's bonds typically are rated BBB, and trade at a yield of -6%. GM decided to issue bonds with a 2% coupon. Why would GM choose this coupon rate? O To lower cashflow requirements during the life of the bond To increase cash proceeds from the bond offering To take advantage of the lower interest rates Question 9 O $.66 on the dollar O $300 1 pts A company goes bankrupt. After much deliberation, it is decided that the firm shall liquidate all their assets. The proceeds from the liquidation are $200. There are $300 worth of bonds outstanding. How much will the bond holders recover? O Nothing 1 pts 1 pts