True or False?

1. If interest rates rise, the prices of existing bonds increase.

2. Since bonds pay a fixed amount of interest, their prices do not fluctuate.

3. If a convertible bond is converted, the firms use of financial leverage increases.

4. The interest paid by municipal bonds is not subject to federal income taxation.

5. In general, if interest rates rise, the prices of existing bonds rise.

6. If a company defaults on its bonds, interest continues to accrue but may not be paid.

7. Current yield provides the best measure of a bonds investment return.

8. Preferred stock dividends are usually fixed.

9. If a cumulative preferred stocks dividend is in arrears, the dividend is not being paid.

10. Corporations are obligated to pay cash dividends if they generate earnings.

11. The value of a preferred stock rises when interest rates rise.

12. The shorter the term of a preferred stock, the less volatile should be its price.

13. An increase in the required return will tend to increase the value of a stock.

14. Corporations that pay common stock dividends apply less to retained earnings than if they didnt pay dividends.

15. The shares of mutual funds are readily bought and sold in efficient, secondary markets.

16. The shares of closed-end investment companies generally sell for a premium and rarely sell for a discount.

17. The shares of mutual funds cant sell for a discount.

18. Loading fees reduce the investors return.

19. The loading fee reduces a funds net asset value.

20. An index fund seeks to outperform a specific stock index like the S&P 500.