PART ITrue/False - Answer all 10 questions. Mark your answer on the Scan Tron as either True ("A") or False ("B"). 1 Iesuers of capital market securities such as bonds and common stocks may include the US Treasury, state and local governments (or municipalities and corporations; investors in capital markets securities may include individuals and institutions such as pension funds, insurance companies, and banks. a. b. True False Chapter 7 of the Bankruptcy Code refers to reorganization and Chapter 11 of the Bankruptcy Code refers to liquidation. a. b. True False 3. Sinking funds are provisions included in bond indentures that require companies to retire bonds on a scheduled basis prior to their final maturity. Many indentures allow the company to acquire bonds for sinking fund purposes by either (1) purchasing bonds on the open market at the going market price or (2) selecting the bonds to be called by a lottery administered by the trustee, in which case the price paid is the bond's face value. a. True b. False 4. Bonds rated BB- by the major ratings agencies are considered 'investment-grade', and are hence suitable for most individual investors to buy and hold. a. True b. False 5. A bond has a $1,000 par value, makes annual interest payments of $100, has 5 years to maturity, cannot be called, and is not expected to default. The bond should sell at a premium if market interest rates are below 10% and at a discount if interest rates are greater than 10%. a. True b. False