Question

State whether each of the following statements is true or false.

1. Mortgage bonds and sinking fund bonds are both examples of debenture bonds.

2. Convertible bonds are also known as callable bonds.

3. The market rate is the rate investors demand for loaning funds.

4. Semiannual interest on bonds is equal to the face value times the stated rate times 6/12.

5. The present value of a bond is the value at which it should sell in the market.

Answer 1

1.

False

2.False

3.

True

4.

True

5.

True

Step-by-step explanation:

1.

Debenture bond secure bonds and these are issued against the security of an asset.

2.

Convertible bonds are not callable bond, because the callable bond can be called at any time but the convertible bond can be converted on a specific date..

3.

Market rate is the required rate of return by the investors. it is a rate that investors expects from the investment.

4.

Annual means a year or 12 month, semiannual means a half year or 6 months. 6/12 is the ratio used for semiannual interest period.

5.

The selling price of a bond can be determined by calculating the present value of the future cash flows of the bonds.