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Bonds Q&A Quick Test Question #1: Which of the following scenarios is best suited for an investment in bonds? A. Candy wants to set money aside for college for her two-year-old daughter. B. Bob wants to diversify into a portfolio that will provide guarantee of principal. C. Nancy needs to find a home for money that she'll be using in five months for a trip to Pago Pago. D. Agatha just retired and wants a relatively stable investment that will also give her monthly income. Question #2: Municipal bonds: A. Fund projects for the public good, such as roads and water district or hospital projects. B. Are always exempt from both federal and state income taxes. C. Can help to reduce possible income taxes on Social Security income. D. Are equally beneficial for people in a low- as well as a high-income-tax bracket. Question #3: Which bond would usually be considered to carry the highest amount of risk? A. A high-quality, short-term bond. B. A low-quality, long-term bond. C. A high-quality, long-term bond. D. A low-quality, short-term bond. Question #4: The coupon rate is the: A. Part of the bond the investor tears off to obtain a discount. B. Quality rating of a bond. C. Fixed percentage that a bond pays annually to the lender. D. Interest rate found on a corporate bond. Question #5: Government Agency bonds: A. Are direct obligations of the U.S. government. B. Are usually exempt from income taxes. C. Are bonds issued by government agencies. D. Are considered riskier than corporate bonds. Question #6: Which of the following will affect the price of a bond? A. Interest rate fluctuations. B. The term of a bond. C. The quality of a bond. D. All of the above. AIG VALIC is the marketing name for the family of companies comprising VALIC Financial Advisors, Inc.; VALIC Retirement Services Company; VALIC Trust Company; and The Variable Annuity Life Insurance Company (VALIC); members of American International Group, Inc. < PREVIOUS NEXT > #38599