Financial Management - Study Mode

[#941] Difference between bond's yield and any other security yield having same maturities is considered as
Correct Answer

(B) bond spread

Explanation

Solution: Difference between bond's yield and any other security yield having same maturities is considered as bond spread. The term “bond spreads” or “spreads” refers to the interest rate differential between two bonds.

[#942] Protective covenant devised in market to reduce event risk and to control debt cost is classified as
Correct Answer

(B) super poison put

Explanation

Solution: Protective covenant devised in market to reduce event risk and to control debt cost is classified as super poison put. Protective covenant. A part of an indenture or loan agreement that limits certain actions a company may take during the term of the loan to protect the lender's interests.

[#943] Coupon rate of convertible bond is
Correct Answer

(B) lower

Explanation

Solution: Coupon rate of convertible bond is lower. Investors will generally accept a lower coupon rate on a convertible bond, compared with the coupon rate on an otherwise identical regular bond, because of its conversion feature.

[#944] Rate denoted as r* is best classified as
Correct Answer

(A) real risk-free interest rate

Explanation

Solution: Rate denoted as r* is best classified as real risk-free interest rate. The Risk-Free Rate of return is the interest rate an investor can expect to earn on an investment that carries zero risk.

[#945] An outstanding bonds are also classified as
Correct Answer

(D) seasoned bonds

Explanation

Solution: An outstanding bonds are also classified as seasoned bonds. A seasoned issue is an issue of additional securities from an established company whose securities already trade in the secondary market. A seasoned issue is also known as a "seasoned equity offering" or "follow-on offering."