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Basic Features and Coupon Structures
Match the following government sector bonds to their respective class.
(drag the elements to the correct boxes)
Supranational Bond
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Sovereign Bond
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Non-sovereign Bond
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Quasi-government Bond
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Basic Features and Coupon Structures
A bond pays no interest for the first 2 years. It pays a coupon rate of 12% from the third year until maturity on the tenth year, together with the return of principal.
What is the most appropriate classification of this bond based on maturity?
Basic Features and Coupon Structures
A bond pays no interest for the first 2 years. It pays a coupon rate of 12% from the third year until maturity on the tenth year, together with the return of principal.
What is the most appropriate classification of this bond based on coupon structure?
Basic Features and Coupon Structures
The coupon rate of a floating-rate note that makes payments every year in March and September is the 180-day LIBOR + 30 bps.
The 180-day LIBOR in March this year was 1.5%, and 2.0% in September. What is the interest rate that applies for the September coupon?
Basic Features and Coupon Structures
Dominic is a US-based bond investor who wishes to invest in a Mexican-based company. He is wary of foreign exchange risk, yet would like to have the opportunity to participate in the appreciation of the Mexican peso.
Which of the following is the most appropriate choice for Dominic?
Basic Features and Coupon Structures
Match the descriptions to the type of inflation-linked bond.
Capital-indexed bond
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Interest-indexed bond
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Indexed-annuity bond
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Indexed zero-coupon bonds
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Basic Features and Coupon Structures
Match the descriptions to the type of inflation-linked bond.
Capital-indexed bond
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Interest-indexed bond
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Indexed-annuity bond
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Indexed zero-coupon bonds
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Basic Features and Coupon Structures
A 10-year, 7% semi-annual fixed coupon bond has a face value of $1000 and is currently trading at $1050. How much is each coupon payment?
Basic Features and Coupon Structures
Which of the following statements is true regarding US Treasury Inflation Protection Securities (TIPS)?
Legal, Regulatory and Tax Considerations
Which of the following are most likely the characteristics of a bond trustee?
Legal, Regulatory and Tax Considerations
Which of the following is least accurate of unsecured bonds?
Legal, Regulatory and Tax Considerations
Supreme Corp has a vehicle leasing business segment in which it has issued bonds such that the cash flows of the vehicle leasing business goes to the bondholders. The bond issue is structured as an Asset-backed Security (ABS) under a Special Purpose Vehicle.
Last year, the vehicle leasing business did badly and its cash flow could not meet the obligations to the ABS bondholders. What recourse do the ABS bondholders have against Supreme Corp?
Legal, Regulatory and Tax Considerations
Supreme Corp has a vehicle leasing business segment in which it has issued bonds such that the cash flows of the vehicle leasing business goes to the bondholders. The bond issue is structured as an Covered Bond.
Last year, the vehicle leasing business did badly and its cash flow could not meet the obligations to the Covered bondholders. What recourse do the Covered bondholders have against Supreme Corp?
Legal, Regulatory and Tax Considerations
Which of the following are internal credit enhancements?
Legal, Regulatory and Tax Considerations
An ABS is required to make $5 million of payments to its bondholders, but it only has $4 million to pay. The ABS has a credit enhancement feature where a bank proves a letter of credit to the ABS. What is the bank’s obligation in this situation?
Legal, Regulatory and Tax Considerations
Which of the statements is most accurate regarding covenants?
Legal, Regulatory and Tax Considerations
Match the bonds to their jurisdiction. (Drag and drop)
Local Bond
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Foreign Bond
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Eurobond
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Contingency Provisions
A company anticipates that interest rates will fall and wishes to be able to take advantage of cheaper borrowing rates in the future if that happens. Which type of bonds should the company issue now?
Contingency Provisions
Match the description to the style of callable bond. (Drag and drop)
Bermuda style
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European style
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American style
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Contingency Provisions
An investor anticipates that interest rates will fall in the near term. Which type of bonds should the investor buy?
Contingency Provisions
Which of the following statements is most accurate?
Contingency Provisions
A convertible bond has a conversion price of $50. The par value of each bond is $1000, and is currently trading at $1060. The company shares is currently trading at $70, and the bondholder has decided to convert one bond. What is the conversion premium?
Are you a CFA Level I candidate, or someone who is exploring taking the CFA exam? Four years ago, I was in your shoes. I am a Computer Engineering graduate and have been working as an engineer all my life. Having developed a keen interest in finance, I decided on a career switch to the finance field and enrolled into the CFA program at the same time.
Adjusting to the drastic career change was tough. I naturally neglected the preparation for my Level I exam in June 2014. It was not until the middle of March 2014 that I realized I only had a little more than 2 months to the exam. To compound my problems, I basically did not have a preparation strategy. Having no background in finance at all, I tried very hard to read the curriculum from cover to cover, but eventually that fell flat. I can still recall the number of times I dozed off while studying, or just going back and forth trying to understand even the simplest concept. My mind simply could not keep up after a hard day at work.
Does all these sound familiar to you? Well, take heart. No matter how bleak it seems, at least sit for the exam and treat it as a learning experience. That was basically my attitude as I burrowed through my exam prep with toil and stress. By God’s grace, I did pass my Level I exam in June 2014. It was an experience I would not want to revisit though.
For the Level II exam, I endeavoured not to repeat the mistakes I made. Based on the Pareto 80/20 principle, I learnt to extract the most essential bits from the curriculum enough to give me that 80% result to pass. Being a visual learner, I took notes and summaries in pictorial form. Instead of reserving huge segments of time to study, I carved out pockets of time to learn and practise – accommodating to my full-time job. I managed to pass my Level II and Level III exams consecutively with considerably less effort and stress than when I did my level I.
I love the CFA Program and truly value the skills and ethics that are imparted to make me a better finance professional. My desire is to help candidates who are keen to pursue this path to do so in the most effective and painless process as possible – based on the lessons that I learnt as a candidate. I have set up PrepNuggets with the vision to revolutionise learning by using technology, catering to the short attention span that we can afford. If this makes sense to you, join the PrepNuggets community by signing up for your free student account. I am confident that the materials that we have laboriously crafted will bring you closer to that dream pass with just that 20% effort. Let us do the hard work for you.
Regards,
Keith Tan, CFA
Founder and Chief Instructor
PrepNuggets
Keith is the founder and chief instructor of PrepNuggets. He has a wide range of interests in all things related to tech, from web development to e-learning, gadgets to apps. Keith loves exploring different cultures and the untouched gems around the world. He currently lives in Singapore but frequently travels to share his knowledge and expertise with others.
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