Financial Management - Study Mode

[#946] An inflation rate includes in bond's interest rates is one which is inflation rate
Correct Answer

(B) expected in future

Explanation

Solution: An inflation rate includes in bond's interest rates is one which is inflation rate expected in future. Inflation is measured in a variety of ways depending upon the types of goods and services considered and is the opposite of deflation which indicates a general decline occurring in prices for goods and services when the inflation rate falls below 0 percent.

[#947] A premium charged by lenders for securities that cannot be converted into cash is classified as
Correct Answer

(D) Both B and C

Explanation

Solution: A premium charged by lenders for securities that cannot be converted into cash is classified as liquidity premium and marketability premium.

[#948] An unsecured bond that provides no lien against property as security for bond obligation is classified as
Correct Answer

(B) debenture

Explanation

Solution: An unsecured bond that provides no lien against property as security for bond obligation is classified as debenture. A debenture is a type of debt instrument that is not secured by collateral and usually has a term greater than 10 years. Debentures are backed only by the creditworthiness and reputation of the issuer. Both corporations and governments frequently issue debentures to raise capital or funds.

[#949] Unsecured bonds which is designated for only notes payable or all other debts are classified as
Correct Answer

(D) subordinated bonds

Explanation

Solution: Unsecured bonds which is designated for only notes payable or all other debts are classified as subordinated bonds. Subordinated debt is a loan or security that ranks below other loans or securities with regard to claims on assets or earnings. Subordinated debt is also known as a junior security or subordinated loan.

[#950] A market interest rate for specific type of bond is classified as bonds
Correct Answer

(A) required rate of return

Explanation

Solution: A market interest rate for specific type of bond is classified as bonds required rate of return.