Practice Test

Q1) When interest rates are declining, investors have to reinvest their interest income and any return of principal, at lower prevailing rates, it is called _____. Show Answer

Q2) When the required rate of return is less than the coupon rate, the premium on the bond _____as maturity approaches. Show Answer

Q3) The bonds with shorter maturity will have _____ duration. Show Answer

Q4) Face value is the value stated on the face of the bond and is also known as _____. Show Answer

Q5) If a 3 years redeemable bond is purchased and held till maturity , the rate of return earned is called Show Answer

Q6) A inverted yield curve signifies a possible Show Answer

Q7) When the required rate of return is equal to the coupon rate, value of redeemable bond is equal to its: Show Answer

Q8) Debentures and bonds are Show Answer

Q9) Bonds are issued by Show Answer

Q10) Debentures or bonds are Show Answer

Q11) Debentures may be Show Answer

Q12) Value of a debenture depends on Show Answer

Q13) Irredeemable debentures are Show Answer

Q14) The level of risk premium depends upon the level of_______. Show Answer

Q15) The cost of security is Rs. 140, market price Rs.200, dividend earned Rs. 12, What is the capital gain to the investor? Show Answer

Q16) Bonds can be ______. Show Answer

Q17) In countries abroad there is literally no distinction between _______ and Debentures. Show Answer

Q18) The abbreviation YTM stands for _______. Show Answer

Q19) Which agencies have issued Bonds in India in the near past? Show Answer

Q20) Returns on bonds are termed as ______. Show Answer

Q21) The higher the bond’s duration, the ______ its sensitivity to the change (also known as volatility) and vice versa. Show Answer

Q22) Interest on debenture is always calculated on Show Answer

Q23) YTM can be calculated using Show Answer

Q24) Debt instruments carry Show Answer

Q25) Government bonds carry Show Answer

Q26) Foreign bonds are subject to Show Answer

Q27) Rate of return on a debt instrument depends on Show Answer

Q28) Rate of return on investment is affected by Show Answer

Q29) Current yield is a proportion between Show Answer

Q30) Bond price volatility is related to Show Answer

Q31) Measurement of bond returns is done by Show Answer

Q32) The bonds with shorter maturity will have _____ duration. Show Answer

Q33) When interest rates rise, bond prices fall . Show Answer

Q34) Higher the coupon rate, lower the bond duration and vice versa Show Answer

Q35) The bonds with shorter maturity will have lower duration. Show Answer

Q36) The risk that a change in the tax laws could affect the value of taxable or tax-exempt interest income is called liquidity risk Show Answer

Q37) Bond are ownership instruments. Show Answer

Q38) Bonds are debt instrument Show Answer

Q39) Trading securities are investments made with the intent of reselling them in the near future. Show Answer

Q40) A bond payable is a mere promise to pay. Show Answer

Q41) Default means honouring the investment on its due date. Show Answer

Q42) Securities are financial Assets. Show Answer

Q43) Short term investments are made to gain control over the company. Show Answer

Q44) The right to buy or sell a certain security within a certain time and at a certain price is called future contract. Show Answer

Q45) Secondary Market is the market for fresh issue of shares. Show Answer

Q46) Beta measures the changes in stock prices in response to changes in interest rates. Show Answer

Q47) Ratio Analysis and Trend Analysis are the general tools used in Technical Analysis. Show Answer

Q48) The Government of India set up RBI in 1998 for dealing with all matters relating to development and regulation of security market and investor protection. Show Answer

Q49) If the rate of interest falls the price of the security increases. Show Answer

Q50) With a rise in prices a reduction in the purchasing power of the rupee is known as inflation risk. Show Answer

Q51) Variance as a measure of risk is the square of standard deviation. Show Answer

Q52) Unsystematic risk reduces with diversification of investment. Show Answer

Q53) When interest rate rises bond price also increases. Show Answer

Q54) Bonds are not listed on the stock exchange Show Answer

Q55) Debentures may be secured Show Answer

Q56) Value of a debenture depends on maturity period Show Answer

Q57) Interest on debenture is calculated on market value Show Answer

Q58) YTM can be calculated using IRR Show Answer

Q59) Debt instruments carry call risk Show Answer

Q60) Government bonds carry risk of default Show Answer

Q61) Foreign bonds are subject to foreign exchange risk Show Answer

Q62) Inflation does not affect the rate of return Show Answer

Q63) Current yield is a measure of return on MF Show Answer

Q64) The bonds with higher maturity will have lower price risk. Show Answer

Q65) The possibility that a bond issuer will be unable to make interest or principal payments when they are due is called market risk. Show Answer

Q66) A bond’s price moves inversely proportional to its yield to maturity. Show Answer