Question

1. In addition to the interest earned on a bond, it is also possible that the actual bond will increase in value over time.

Select one:

True

False

2. During their lifetime, bonds can be sold for more or less than their face value depending on the demand for these particular bonds.

Select one:

True

False

3. Because dividends are fixed, the prices of preferred stock are not as volatile as those of common stock.

Select one:

True

false

4. Beta is the measure of a stock's sensitivity to its trading volume.

Select one:

True

false

5. Corporate bonds are usually sold in increments of $100.

Select one:

True

false

Answer 1

1. In addition to the interest earned on a bond, it is also possible that the actual bond will increase in value over time. -False

The face value of a bond is fixed irrespective of the market interest rates. At maturity, the investor gets only a face-value of the bond irrespective of the market interest rates.

2. During their lifetime, bonds can be sold for more or less than their face value depending on the demand for these particular bonds - True

The yield on the bond decides the bond price at any point in time. If the market yield is higher than the coupon rate, bond trades at a value lower than the face value, and vice versa.

3. Because dividends are fixed, the prices of preferred stock are not as volatile as those of common stock - True

Since preferred stocks have fixed dividends every period. This makes them less prone to volatility than common stock.

4. Beta is the measure of a stock's sensitivity to its trading volume. - False

Beta is a measure of market risk and is dependent on the stock's sensitivity to changes in market (index) changes.

5. Corporate bonds are usually sold in increments of $100 - False

Corporate bonds are usually sold in increments of $1000