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ABA CTFA Exam
Certified Trust and Financial Advisor (CTFA) (Page 9 )

Updated On: 1-Feb-2026
Page 9 of 91
PDF with 895 Questions

The call-option value of a callable bond is likely to be high when:

  1. Interest rates are volatile
  2. Interest rates are low and expected to remain low
  3. Interest rate are high and expected to remain high
  4. Markets are inefficient

Answer(s): A



A company refunds its bonds for any of the following reasons Except for:

  1. To eliminate restrictive covenants
  2. To reduce interest costs
  3. To show higher reported profits
  4. To issue new bonds at higher rate of interest

Answer(s): D



Which of the following bonds offer the investor the most protection?

  1. First-mortgage bonds
  2. Debentures
  3. Sub Ordinated Debentures
  4. Income bonds

Answer(s): A



Protective covenants are:

  1. To protect employees
  2. To protect the interest of the company
  3. To protect shareholders
  4. To protect bondholders

Answer(s): D



A bond issue may be retired by:

  1. calling the bonds if there is a call feature
  2. converting the bonds (if convertible) into common stock
  3. making a single-sum payment at final maturity
  4. All of the above

Answer(s): D



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