Fixed-Income Securities: Defining Elements
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Question 1 of 22
1. Question
Basic Features and Coupon Structures
Match the following government sector bonds to their respective class.
(drag the elements to the correct boxes)Sort elements
- World Bank Bonds
- US T-bills
- California State Municipal Bond
- Fannie Mae Bond
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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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Question 2 of 22
2. Question
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?
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Question 3 of 22
3. Question
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?
CorrectIncorrect -
Question 4 of 22
4. Question
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?
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Question 5 of 22
5. Question
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?
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Question 6 of 22
6. Question
Basic Features and Coupon Structures
Match the descriptions to the type of inflation-linked bond.
Sort elements
- Principal is adjusted based on inflation
- Interest adjusted based on inflation
- Fully amortising bonds with periodic payments adjusted for inflation
- Sold at a discount, payment at maturity adjusted for inflation
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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
CorrectIncorrect -
Question 7 of 22
7. Question
Basic Features and Coupon Structures
Match the descriptions to the type of inflation-linked bond.
Sort elements
- Principal is adjusted based on inflation
- Interest adjusted based on inflation
- Fully amortising bonds with periodic payments adjusted for inflation
- Sold at a discount, payment at maturity adjusted for inflation
-
Capital-indexed bond
-
Interest-indexed bond
-
Indexed-annuity bond
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Indexed zero-coupon bonds
CorrectIncorrect -
Question 8 of 22
8. Question
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?
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Question 9 of 22
9. Question
Basic Features and Coupon Structures
Which of the following statements is true regarding US Treasury Inflation Protection Securities (TIPS)?
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Question 10 of 22
10. Question
Legal, Regulatory and Tax Considerations
Which of the following are most likely the characteristics of a bond trustee?
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Question 11 of 22
11. Question
Legal, Regulatory and Tax Considerations
Which of the following is least accurate of unsecured bonds?
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Question 12 of 22
12. Question
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?
CorrectIncorrect -
Question 13 of 22
13. Question
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?
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Question 14 of 22
14. Question
Legal, Regulatory and Tax Considerations
Which of the following are internal credit enhancements?
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Question 15 of 22
15. Question
Legal, Regulatory and Tax Considerations
An ABS is required to make $5 million of payments to its bondholders, but it only has $4 million to pay. The ABS has a credit enhancement feature where a bank proves a letter of credit to the ABS. What is the bank’s obligation in this situation?
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Question 16 of 22
16. Question
Legal, Regulatory and Tax Considerations
Which of the statements is most accurate regarding covenants?
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Question 17 of 22
17. Question
Legal, Regulatory and Tax Considerations
Match the bonds to their jurisdiction. (Drag and drop)
Sort elements
- A US company issued US$ bonds in the US market
- A German company issued US$ bonds in the US market
- A Japanese company issued Eurodollar bonds
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Local Bond
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Foreign Bond
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Eurobond
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Question 18 of 22
18. Question
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?
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Question 19 of 22
19. Question
Contingency Provisions
Match the description to the style of callable bond. (Drag and drop)
Sort elements
- Bond can be called on specified dates after the first call date
- Bond can only be called on a specified date
- Bond can be called any time after the first call date
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Bermuda style
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European style
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American style
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Question 20 of 22
20. Question
Contingency Provisions
An investor anticipates that interest rates will fall in the near term. Which type of bonds should the investor buy?
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Question 21 of 22
21. Question
Contingency Provisions
Which of the following statements is most accurate?
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Question 22 of 22
22. Question
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?
CorrectIncorrect
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