322-8

A callable security will be called in when flotation costs of a new security issue are less than savings from issuing a new security at the same interest rate.  

A) True  
B) False

Marketability of a security is affected by the volume of similar securities available.  

A) True  
B) False

Marketability of a security is affected by the volume of similar securities available.  

A) True  
B) False

In a perfectly efficient market the management of a bond-issuing company should be biased between issuing callable or non-callable securities.  

A) True  
B) False

When agency ratings on securities are different, the accepted practice is to take the highest rating or the second highest rating.  

A) True  
B) False

From 2006 to the end of 2009, the difference between long-term interest rates on corporate bonds, Baa, and 10-year US treasury notes has decreased to around 8 percent.  

A) True  
B) False

The lowest marginal tax rate applied to corporations is:  

A) 15%.  
B) 34%.  
C) 39%.  
D) 50%.  
E) none of the above

The difference between the promised yield and the expected yield is the:  

A) anticipated loss due to the market.  
B) anticipated inflation rate.  
C) actual inflation rate.  
D) liquidity risk premium  
E) none of the above

Junk bonds, which refer to the probability that full repayment of these long-term debt securities are significantly below that for bonds rated investment quality, are rated:  
A) Ba to C by Moody's.  
B) Ba to C by S&P.  
C) BB to C by Moody's.  
D) Ba to D by S&P.  
E) Both A and D
 

The highest marginal tax for individuals (single and married) is:  

A) 25%.  
B) 35%.  
C) 30%.  
D) 46%.
E) 40%.  

During a recession the yield spread between Aaa-rated and Baa-rated bonds would tend to:  

A) decline.  
B) remain unchanged.  
C) first decline then rise.  
D) change in an unpredictable way.  
E) none of the above