Select each statement that is true: 1. Since and investor in bonds is a creditor

Question

Select each statement that is true:

1. Since and investor in bonds is a creditor (or lender), bonds are considered debt securities.

2. The two types of cash flows associated with bonds are dividends and the final face value of the bond ($1000).

3. Investing in bonds is generally considered less risky than in stocks because the amount and timing of bond cash flows is known in advance (and guaranteed by the company) but this is not the case with stocks. Also, bond investors have first claim on assets in the event of bankruptcy.

4. Corporate bonds are usually sold in increments of $10,000 each and have a maturity of 20 years.

5. If the coupon rate is 5% and the market rate is 6% bonds will sell for a discount.

6. Bond interest payments are usually made anually.

7. Most bonds today are bearer bonds.

8. A bond rated BBB will usally offer a higher rate than a bond rated AAA.

9. A bond rated CCC would be considered an investment-grade bond.

10. One advantage of investing in municipal bonds is that the interest is not taxed by the federal government.

Thanks for your answers!

Explanation / Answer

1. true

2.false

3.true

4.false

5.true

6.false

7.false

8.false

9.false

10.true

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