Intro to Bonds

Bonds are . . .

• debits

• assets

• notes payable

• for professional investors only

A bond with an interest rate higher than the market interest rate will be price ______ than its face value.

• higher

• lower

• equal

A 5-year 100,000 bond with a 10% interest rate will pay how much interest in total?

• 1,000

• 2,000

• 10,000

• 15,000

How much will a 5-year 100,000 bond with a 10% interest rate pay each year?

• 1,000

• 2,000

• 10,000

• 15,000

Convertible bonds are those that can be converted (changed) into ________.

True or False: Universities can issue bonds.

• True

• False

A mortgage bond is an example of a . . .

• secured bond

• unsecured bond

You have a 5-year 4% corporate bond with a face value of $1,000. At the end of the five year period, what amount will the corporation pay you? Do not include interest.

• 1,000

• 200

• 960

• 800

You want to invest money so that in 5 years you have $50,000. You know that you can earn 7% per year on an investment opportunity. Thinking about the equation we talked about in class, which number do you need to solve for to find the amount of money that you need to invest today.

• Future Value

• number of years

• Present Value

• interest rate

When a corporation sells a bond, which account does it need to debit?