Which of the following security represents the ownership interest in the firm?

• A) Bond
• B) Equity
• C) All of the given options
• D) Debt

A bondholder has a right to redeem the bond at par on the coupon payment date after some specified period of time. This right is called:

• A) Correct answer is not given
• B) Call option
• C) Call provision
• D) Put provision

The coupon rate of a floating-rate bond is capped and upper and lower rates are called:

• A) Limit
• B) Float
• C) Surplus
• D) Collar

The price of a Rs. 1,000-face value bond is Rs. 910. What will be the yield to maturity if there is a coupon payment of Rs. 90 for 6 years?

• A) Equal to 9%
• B) Cannot be determined without more information
• C) Lower than 9%
• D) Greater than 9%

Which of the following is basic purpose of sinking fund?

• A) Repayment of Bonds
• B) Repayment of Shares
• C) Payment of Dividend
• D) Payment of Salaries

Which of the following type of bond pays no coupon at all and are offered at a price that is much lower than its stated value?

• A) Floating-rate bonds
• B) Government bonds
• C) Zero coupon bonds
• D) Euro bonds

The market price of a Rs. 1,000-face value bond is Rs. 1,000. What will be the yield to maturity if there is a coupon payment of Rs. 90 for 5 years?

• A) Equal to 9%
• B) Lower than 9%
• C) Cannot be determined with the given information
• D) Greater than 9%

All of the following securities are also called debt securities EXCEPT:

• A) Shares
• B) Debentures
• C) Notes
• D) Bonds

Which of the following equation of the relationship between real and nominal interest describes by Fisher?

• A) 1 + r = 1 + R x 1 + h
• B) 1 + h = 1 + R x 1 + r
• C) 1 + R = 1 + r / 1 + h
• D) 1 + R = 1 + r x 1 + h

Which of the following is the credit rating agency in Pakistan?

• A) Standard and Poor’s
• B) Moody’s
• C) All of the given options
• D) PACRA

If a firm is allowed to miss a coupon payment on a bond in a year in which it reports an operating loss, the bond is most likely a(n) _______ bond.

• A) Zero coupon
• B) Floating-rate
• C) Put
• D) Income

Which of the following statement is TRUE regarding debt?

• A) Unpaid debt can result in bankruptcy or financial failure.
• B) Debt provides the voting rights to the bondholders.
• C) Corporation’s payment of interest on debt is fully taxable.
• D) Debt is an ownership interest in the firm.

Which of the following is NOT the responsibility of bond trustee?

• A) Make sure the terms of indenture are obeyed
• B) Announcement of dividend
• C) Manage the sinking fund
• D) Represent the bondholders in default

Between the two identical bonds having different coupon, the price of the ________ bond will change less than that of ________ bond.

• A) None of the given options
• B) Higher-coupon; lower-coupon
• C) Lower-coupon; higher-coupon
• D) Long-term; short-term

Which of the following entity manages the sinking fund?

• A) Chief Executive Officer
• B) Board of Directors
• C) Board of Governors
• D) Bond trustee

Which of the following short-term rating by PACRA denotes a strong capacity for timely repayment?

• A) A2
• B) A1
• C) A1+
• D) A3

Payment of interest on debt securities is fully tax deductible item because:

• A) Fixed nature cost
• B) It’s a cost of doing business
• C) Debt is not owner’s money
• D) Paid out of profit

Between the two identical bonds having different maturity periods, the price of the ________ bond will change less than that of ________ bond.

• A) lower-coupon; higher-coupon
• B) None of the given options
• C) long-term; short-term
• D) short-term; long-term

Expectation of a ______ inflation rate will push long term interest rates ______ than short term rates reflected by an upward term structure.

• A) Higher; higher
• B) Higher; lower
• C) Lower; higher
• D) None of the given options

ABC Company issues 5 year bonds having following characteristics:
Rs. 1,000 face value, initial price Rs. 497 and yield to maturity is 15%.
Bonds issued by ABC Company falls under which one of the following type of bonds?

• A) Convertible bonds
• B) Floating-rate bonds
• C) Zero coupon bonds
• D) Government bonds