Corporate Bonds and Stocks Quiz

Which is a corporate IOU?

• bank account

• bonds

• stocks

Which one gives you an ownership, or “share,” in a company?

• bank account

• bonds

• stocks

Which one is offered by the U.S. government as well as by private corporations?

• bank account

• bonds

• stocks

Government bonds and corporate stocks are

• Substitutes

• Complements

Which bond will usually pay a higher interest rate?

• Bond rated AAA

• Bond rated BBB

Which bond will usually pay a higher interest rate?

• U.S. government bond

• General Motors bond

Which bond will usually pay a higher interest rate?

• Citibank bond that gets repaid in 30 years

• Citibank bond that gets repaid in 1 year

Suppose you’d like to invest in a company and you’ve narrowed your choice down to three firms: Company A is offering a zero-coupon bond with a face value of $1000 to be repaid in 1 year for $963. Company B has the same face value and maturity date but sells for $871. And company C also has the same face value and maturity but sells for $985. In which would you rather invest?

• Company A

• Company B

• Company C

• Cannot be determined with the given information

How do government bonds differ from corporate bonds?

• Government bonds are not backed by the government

• Government bonds are riskier than corporate bonds

• Government bonds are issued by the government, while corporate bonds are issued by corporations.

• Corporate bonds have higher interest rates than government bonds

What is the primary purpose of a stock exchange?

• To provide a platform for the trading of commodities

• To provide a platform for the trading of stocks, bonds and other securities

• To provide a platform for the trading of real estate

• To provide a platform for the trading of cryptocurrencies