Financial Management - Study Mode

[#531] Price of an outstanding bond decreases when market rate is
Correct Answer

(A) increased

Explanation

Solution: Price of an outstanding bond decreases when market rate is increased.

[#532] Rate of interest which is usually discussed by investors whenever rate of return is discussed is classified as
Correct Answer

(A) yield to maturity

Explanation

Solution: Rate of interest which is usually discussed by investors whenever rate of return is discussed is classified as yield to maturity. Yield to maturity (YTM) is the total return anticipated on a bond if the bond is held until it matures. Yield to maturity is considered a long-term bond yield but it is expressed as an annual rate.

[#533] Tax free bonds issue for welfare by industrial agencies or pollution control agencies are classified as
Correct Answer

(D) Both B and C

Explanation

Solution: Tax free bonds issue for welfare by industrial agencies or pollution control agencies are classified as development bonds and pollution control bonds.

[#534] Value generally promises to pay at maturity date and a firm borrows is considered as bonds
Correct Answer

(D) par value

Explanation

Solution: Value generally promises to pay at maturity date and a firm borrows is considered as bonds par value. The par value of a bond also called the face amount or face value is the value written on the front of the bond.

[#535] Maturity date decides at time of issuance of bond and legally permissible is classified as
Correct Answer

(A) original maturity

Explanation

Solution: Maturity date decides at time of issuance of bond and legally permissible is classified as original maturity. The "original maturity" is the time between the issue date and the maturity date. This date is included in a bond’s indenture at the time of issuance. An investor that purchases a bond on its issuance date will be quoted the original maturity.