Question

1 What is unsecured bond called?

• A. senior bond
• B. debenture

2 The face value of a bond is typically repaid at maturity.

• A. True
• B. False

3 Before it matures, the price of any bond is always less than its face value.

• A. True
• B. False

Answer 1

1.B.Debenture.

An unsecured bond is generally referred to as debenture.

Senior bond is one whose holders are given priority repayment in case of winding up.

2.True.

Most of the bonds typically repay face value at the maturity.

3.False.

The price of the bond before maturity depends on its yield to maturity.

If yield to maturity is greater than the coupon rate, the price of the bond will be lower than the face value.

If yield to maturity is lower than the coupon rate, the price of the bond will be higher than the face value.