Deck 2: Fixed-Income Markets: Issuance, Trading, and Funding

Question 1

When classified by type of issuer, asset-backed securities are part of the:

A) corporate sector.
B) structured finance sector.
C) government and government-related sector.

Answer 1

B

Question 2

a bond issued internationally, outside the jurisdiction of the country in whose currency the bond is denominated, is best described as a:

A) eurobond.
B) foreign bond.
C) municipal bond.

Answer 2

A

Question 3

The variability of the coupon rate on a libor-based floating-rate bond is most likely due to:

A) periodic resets of the reference rate.
B) market-based reassessments of the issuer's creditworthiness.
C) changing estimates by the libor administrator of borrowing capacity.

Answer 3

A

Question 4

a liquid secondary bond market allows an investor to sell a bond at:

A) the desired price.
B) a price at least equal to the purchase price.
C) a price close to the bond's fair market value.

Question 5

in major developed bond markets, newly issued sovereign bonds are most often sold to the public via a(n):

A) auction.
B) private placement.
C) best efforts offering.

Question 6

Which factor is associated with a more favorable quality sovereign bond credit rating?

A) issued in local currency, only
B) Strong domestic savings base, only
C) issued in local currency of country with strong domestic savings base

Question 7

a mechanism by which an issuer may be able to offer additional bonds to the general public without preparing a new and separate offering circular best describes:

A) the grey market.
B) a shelf registration.
C) a private placement.

Question 8

Sovereign bonds are best described as:

A) bonds issued by local governments.
B) secured obligations of a national government.
C) bonds backed by the taxing authority of a national government.

Question 9

a bond market in which a communications network matches buy and sell orders initiated from various locations is best described as an:

A) organized exchange.
B) open market operation.
C) over-the-counter market.

Question 10

The distinction between investment grade debt and non-investment grade debt is best described by differences in:

A) tax status.
B) credit quality.
C) maturity dates.

Question 11

Compared with developed markets bonds, emerging markets bonds most likely:

A) offer lower yields.
B) exhibit higher risk.
C) benefit from lower growth prospects.

Question 12

Which of the following statements is most accurate? an interbank offered rate:

A) is a single reference rate.
B) applies to borrowing periods of up to 10 years.
C) is used as a reference rate for interest rate swaps.

Question 13

Which of the following statements related to secondary bond markets is most accurate?

A) newly issued corporate bonds are issued in secondary bond markets.
B) Secondary bond markets are where bonds are traded between investors.
C) The major participants in secondary bond markets globally are retail investors.

Question 14

Which type of sovereign bond has the lowest interest rate risk for an investor?

A) Floaters
B) Coupon bonds
C) discount bonds

Question 15

agency bonds are issued by:

A) local governments.
B) national governments.
C) quasi-government entities.

Question 16

Corporate bond secondary market trading most often occurs:

A) on a book-entry basis.
B) on organized exchanges.
C) prior to settlement at T + 1.

Question 17

in most countries, the bond market sector with the smallest amount of bonds outstanding is most likely the:

A) government sector.
B) financial corporate sector.
C) non-financial corporate sector.

Question 18

an investment bank that underwrites a bond issue most likely:

A) buys and resells the newly issued bonds to investors or dealers.
B) acts as a broker and receives a commission for selling the bonds to investors.
C) incurs less risk associated with selling the bonds than in a best efforts offering.

Question 19

With respect to floating-rate bonds, a reference rate such as the london interbank offered rate (libor) is most likely used to determine the bond's:

A) spread.
B) coupon rate.
C) frequency of coupon payments.

Question 20

Which of the following describes privately placed bonds?

A) They are non-underwritten and unregistered.
B) They usually have active secondary markets.
C) They are less customized than publicly offered bonds.

Question 21

When issuing debt, a company may use a sinking fund arrangement as a means of reducing:

A) credit risk.
B) inflation risk.
C) interest rate risk.

Question 22

a repurchase agreement is most comparable to a(n):

A) interbank deposit.
B) collateralized loan.
C) negotiable certificate of deposit.

Question 23

The type of bond issued by a multilateral agency such as the international Monetary Fund (iMF) is best described as a:

A) sovereign bond.
B) supranational bond.
C) quasi-government bond.

Question 24

eurocommerical paper is most likely:

A) negotiable.
B) denominated in euro.
C) issued on a discount basis.

Question 25

The repo margin on a repurchase agreement is most likely to be lower when:

A) the underlying collateral is in short supply.
B) the maturity of the repurchase agreement is long.
C) the credit risk associated with the underlying collateral is high.

Question 26

Which of the following is a source of wholesale funds for banks?

A) demand deposits
B) Money market accounts
C) negotiable certificates of deposit

Question 27

Which of the following statements relating to commercial paper is most accurate?

A) There is no secondary market for trading commercial paper.
B) only the strongest, highly rated companies issue commercial paper.
C) Commercial paper is a source of interim financing for long-term projects.

Question 28

For the issuer, a sinking fund arrangement is most similar to a:

A) term maturity structure.
B) serial maturity structure.
C) bondholder put provision.

Question 29

a bond issued by a local government authority, typically without an explicit funding commitment from the national government, is most likely classified as a:

A) sovereign bond.
B) quasi-government bond
C) non-sovereign government bond.

Question 30

a characteristic of negotiable certificates of deposit is:

A) they are mostly available in small denominations.
B) they can be sold in the open market prior to maturity.
C) a penalty is imposed if the depositor withdraws funds prior to maturity.

Question 31

The repo margin is:

A) negotiated between counterparties.
B) established independently of market-related conditions.
C) structured on an agreement assuming equal credit risks to all counterparties.