1. Which is a corporate IOU?
 *

a. bank account

b. bonds

c. stocks

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

a. bank account

b. bonds

c. stocks

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

a. bank account

b. bonds

c. stocks

4. Government bonds and corporate stocks are *

a. Substitutes

b. Complements

5. Which bond will usually pay a higher interest rate?
 *

a. Bond rated AAA

b. Bond rated BBB

6. Which bond will usually pay a higher interest rate?
 *

a. U.S. government bond

b. General Motors bond

7. Which bond will usually pay a higher interest rate?
 *

a. Citibank bond that gets repaid in 30 years

b. Citibank bond that gets repaid in 1 year

8. 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? *

a. Company A

b. Company B

c. Company C

d. Cannot be determined with the given information