BONDS & FIXED INCOME | Series 7 Exam Prep

BONDS & FIXED INCOME

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Quiz Questions (click to show/hide)

1. Which of the following bonds has the LEAST credit risk?

A. Corporate bond B. Municipal bond C. U.S. Treasury bond D. Junk bond

2. When interest rates rise, bond prices generally:

A. Fall B. Rise C. Remain unchanged D. Become more liquid

3. A bond purchased at a discount will MOST likely:

A. Decrease in yield B. Increase in value toward par at maturity C. Pay no interest D. Be called early

4. Which bond is MOST sensitive to interest rate changes?

A. Short-term bond B. Long-term bond C. Floating rate bond D. Treasury bill

5. What is the primary purpose of a sinking fund?

A. Increase interest payments B. Reduce default risk by retiring debt C. Raise capital D. Delay maturity

6. Which of the following is TRUE about municipal bonds?

A. Always tax-free B. Often exempt from federal income tax C. Backed by corporations D. High default risk

7. A callable bond exposes investors to:

A. Market risk only B. Reinvestment risk C. Currency risk D. Inflation protection

8. Zero-coupon bonds:

A. Pay quarterly interest B. Are sold at deep discounts C. Have no maturity D. Are always callable

9. Yield to maturity assumes:

A. Bonds are never sold B. Interest is reinvested at the same rate C. No taxes apply D. Prices remain constant

10. Which bond is backed by revenue from a project?

A. General obligation bond B. Revenue bond C. Treasury bond D. Convertible bond