Question 1

Which of the following is not true of a revenue muni bond?

Accepted Answer

A)  Backed by the full faith and credit of the issuing government 
B)  Exempt from federal taxation 
C)  Backed by the revenue from a specific project 
D)  Typically rated by credit rating agencies 
A)  Backed by the full faith and credit of the issuing government 
B)  Exempt from federal taxation 
C)  Backed by the revenue from a specific project 
D)  Typically rated by credit rating agencies A

Question 2

When a reopening of a Treasury security occurs

Accepted Answer

A)  The new security has the same maturity date, but a different coupon than the current one 
B)  The new security has the same coupon, but a different maturity date than the current one 
C)  The new security has the same coupon and maturity date than the current one 
D)  The current on-the-run security goes off the run 
A)  The new security has the same maturity date, but a different coupon than the current one 
B)  The new security has the same coupon, but a different maturity date than the current one 
C)  The new security has the same coupon and maturity date than the current one 
D)  The current on-the-run security goes off the run C

Question 3

How many separate zero-coupon securities can be created from a 7-year Treasury note through the STRIPs process?

Accepted Answer

A)  1 
B)  7 
C)  15 
D)  None-the STRIPs process involves something entirely different 
A)  1 
B)  7 
C)  15 
D)  None-the STRIPs process involves something entirely different C

Question 4

Dealers in Treasury securities finance their inventories through

Accepted Answer

A)  Repurchase agreements (RPs) 
B)  Loans from commercial banks 
C)  Loans from the Fed 
D)  Dealers do not hold inventories 
A)  Repurchase agreements (RPs) 
B)  Loans from commercial banks 
C)  Loans from the Fed 
D)  Dealers do not hold inventories

Question 5

Leverage

Accepted Answer

A)  Adds to the risk profile of a corporation 
B)  Favors shareholders over bondholders 
C)  Typically is limited by restrictive bond covenants 
D)  All of the above 
A)  Adds to the risk profile of a corporation 
B)  Favors shareholders over bondholders 
C)  Typically is limited by restrictive bond covenants 
D)  All of the above

Question 6

Private placements of corporate bonds typically involve

Accepted Answer

A)  Issuers that have difficulty accessing the public market owing to asymmetric information 
B)  Issuers that prefer to remain private 
C)  Commercial banks as investors 
D)  All of the above 
A)  Issuers that have difficulty accessing the public market owing to asymmetric information 
B)  Issuers that prefer to remain private 
C)  Commercial banks as investors 
D)  All of the above

Question 7

Which of the following acts to lower the yield on a corporate bond?

Accepted Answer

A)  Convertibility 
B)  Sinking fund 
C)  Call protection 
D)  All of the above 
A)  Convertibility 
B)  Sinking fund 
C)  Call protection 
D)  All of the above

Question 8

To limit the scope for risk taking (moral hazard) by the managers of a corporation (at the expense of bondholders), bond indentures frequently contain which of the following restrictive covenants?

Accepted Answer

A)  Limitations on the payment of dividends 
B)  Limitations on the firm's leverage 
C)  Limitations on mergers or acquisitions 
D)  All of the above 
A)  Limitations on the payment of dividends 
B)  Limitations on the firm's leverage 
C)  Limitations on mergers or acquisitions 
D)  All of the above

Question 9

Under the Modigliani-Miller Theorem

Accepted Answer

A)  Corporate managers favor leverage 
B)  Corporate managers avoid leverage 
C)  The costs of financing will tend to be the same irrespective of the amount of leverage 
D)  Corporate managers favor financing in the money market 
A)  Corporate managers favor leverage 
B)  Corporate managers avoid leverage 
C)  The costs of financing will tend to be the same irrespective of the amount of leverage 
D)  Corporate managers favor financing in the money market

Question 10

A when-issued Treasury security involves

Accepted Answer

A)  An on-the-run security's going off the run 
B)  A forward contract in which a dealer promises to deliver a new Treasury security once it is issued 
C)  The Treasury's promising to award a security to a noncompetitive bidder 
D)  The Treasury's promising to award a security to a competitive bidder 
A)  An on-the-run security's going off the run 
B)  A forward contract in which a dealer promises to deliver a new Treasury security once it is issued 
C)  The Treasury's promising to award a security to a noncompetitive bidder 
D)  The Treasury's promising to award a security to a competitive bidder

Question 11

Sovereign debt

Accepted Answer

A)  Performs a price-discovery function 
B)  Is used as a benchmark for pricing credit in an economy 
C)  Is typically offered and traded in large, transparent markets 
D)  All of the above 
A)  Performs a price-discovery function 
B)  Is used as a benchmark for pricing credit in an economy 
C)  Is typically offered and traded in large, transparent markets 
D)  All of the above

Which of the following is not true of a revenue muni bond?

When a reopening of a Treasury security occurs

How many separate zero-coupon securities can be created from a 7-year Treasury note through the STRIPs process?

Dealers in Treasury securities finance their inventories through

Leverage

Private placements of corporate bonds typically involve

Which of the following acts to lower the yield on a corporate bond?

To limit the scope for risk taking (moral hazard) by the managers of a corporation (at the expense of bondholders), bond indentures frequently contain which of the following restrictive covenants?

Under the Modigliani-Miller Theorem

A when-issued Treasury security involves

Sovereign debt

Introduction

Overview of the Financial System

The Special Role of Commercial Banks

Factors Affecting Yields

Principles of Portfolio Selection and Efficient Markets

The Money Market

Securitization

The Mortgage Market

The Equity Market

Central Banking and the Federal Reserve

Monetary Policy: The Basics

Monetary Policy: Challenges Faced by Policymakers

Financial Crises

The Foreign Exchange Market and Exchange Rate Regimes

Depository Institutions

The Pricing of Financial Assets

Mutual Funds

Hedge, Venture Capital, and Private Equity Funds

Large Institutional Investors

Filters

Exam 8: The Bond Market

Which of the following is not true of a revenue muni bond?

When a reopening of a Treasury security occurs

How many separate zero-coupon securities can be created from a 7-year Treasury note through the STRIPs process?

Dealers in Treasury securities finance their inventories through

Leverage

Private placements of corporate bonds typically involve

Which of the following acts to lower the yield on a corporate bond?

To limit the scope for risk taking (moral hazard) by the managers of a corporation (at the expense of bondholders), bond indentures frequently contain which of the following restrictive covenants?

Under the Modigliani-Miller Theorem

A when-issued Treasury security involves

Sovereign debt

Introduction

Overview of the Financial System

The Special Role of Commercial Banks

Factors Affecting Yields

Principles of Portfolio Selection and Efficient Markets

The Money Market

Securitization

The Mortgage Market

The Equity Market

Central Banking and the Federal Reserve

Monetary Policy: The Basics

Monetary Policy: Challenges Faced by Policymakers

Financial Crises

The Foreign Exchange Market and Exchange Rate Regimes

Depository Institutions

The Pricing of Financial Assets

Mutual Funds

Hedge, Venture Capital, and Private Equity Funds

Large Institutional Investors

Filters