Question 1

The withholding tax on bond income was originally called the interest equalization tax.

Accepted Answer

A) You can thank John F.Kennedy for imposing this tax. 
B) You can thank Ronald Reagan for imposing this tax. 
C) You can thank Jimmy Carter for imposing this tax. 
D) You can thank George Washington for imposing this tax. 
A) You can thank John F.Kennedy for imposing this tax. 
B) You can thank Ronald Reagan for imposing this tax. 
C) You can thank Jimmy Carter for imposing this tax. 
D) You can thank George Washington for imposing this tax.

Question 2

Market makers in the secondary bond market

Accepted Answer

A) stand ready to buy or sell for their own account. 
B) quote bid and ask spreads. 
C) trade directly with one another, through a broker or with retail customers. 
D) all of the above 
A) stand ready to buy or sell for their own account. 
B) quote bid and ask spreads. 
C) trade directly with one another, through a broker or with retail customers. 
D) all of the above

Question 3

A convertible bond pays interest annually at a coupon rate of 5% on a par value of $1,000.The bond has 10 years maturity remaining and the discount rate on other-wise identical non-convertible debt is 5%.The bond is convertible into shares of common stock at a conversion price of $25 per share (i.e.the bond is exchangeable for 40 shares).Today's closing stock price was $31.25.What is the floor value of this bond?

Accepted Answer

A) $800.00 
B) $1,000 
C) $1,250 
D) None of the above 
A) $800.00 
B) $1,000 
C) $1,250 
D) None of the above

Question 4

Floating-rate notes (FRN)

Accepted Answer

A) experience very volatile price changes between reset dates. 
B) are typically medium-term bonds with coupon payments indexed to some reference rate (e.g.LIBOR). 
C) appeal to investors with strong need to preserve the principal value of the investment should they need to liquidate prior to the maturity of the bonds. 
D) both b) and c) 
A) experience very volatile price changes between reset dates. 
B) are typically medium-term bonds with coupon payments indexed to some reference rate (e.g.LIBOR). 
C) appeal to investors with strong need to preserve the principal value of the investment should they need to liquidate prior to the maturity of the bonds. 
D) both b) and c)

Question 5

In contrast to many domestic bonds,which make _________ coupon payments,coupon interest on Eurobonds is typically paid _________

Accepted Answer

A) semiannual, annually. 
B) annual, semiannually. 
C) quarterly, semiannually. 
D) quarterly, annually. 
A) semiannual, annually. 
B) annual, semiannually. 
C) quarterly, semiannually. 
D) quarterly, annually.

Question 6

Consider a British pound-U.S.dollar dual currency bonds that pay £581.40 at maturity per $1,000 of par value.If at maturity,the exchange rate is $1.90 = £1.00,

Accepted Answer

A) you should insist on getting paid in dollars. 
B) investors holding this bond are better off for the exchange rate. 
C) the issuer of the bond is worse off for the exchange rate. 
D) both b) and c) 
A) you should insist on getting paid in dollars. 
B) investors holding this bond are better off for the exchange rate. 
C) the issuer of the bond is worse off for the exchange rate. 
D) both b) and c)

Question 7

A 1-year,4 percent pound denominated bond sells at par.A comparable risk 1-year,5.5 percent pound/dollar dual-currency bond pays $2,000 at maturity per £1,000 of face value.It sells for £900.What is the implied direct $/£ exchange rate at maturity?

Accepted Answer

A) £0.4405/$1.00 
B) $1.2048/£1.00 
C) $2.2701/£1.00 
D) $2.0000/£1.00 
A) £0.4405/$1.00 
B) $1.2048/£1.00 
C) $2.2701/£1.00 
D) $2.0000/£1.00

Question 8

Investors will generally accept a lower yield on ________ than on __________ of comparable terms,making them a less costly source of funds for the issuer to service.

Accepted Answer

A) bearer bonds, registered bonds 
B) registered bonds, bearer bonds 
C) Eurobonds, domestic bonds 
D) domestic bonds, Eurobonds 
A) bearer bonds, registered bonds 
B) registered bonds, bearer bonds 
C) Eurobonds, domestic bonds 
D) domestic bonds, Eurobonds

Question 9

The Wall Street Journal publishes daily values of yields to maturity for Japanese,German,British,and Canadian Government bonds.

Accepted Answer

A) Bond market participants can thereby compare the yield curve of the various countries. 
B) Bond market participants can thereby compare the term structure of interest rates of the various countries. 
C) Both a) and b) 
D) None of the above 
A) Bond market participants can thereby compare the yield curve of the various countries. 
B) Bond market participants can thereby compare the term structure of interest rates of the various countries. 
C) Both a) and b) 
D) None of the above

Question 10

Eurobond market makers and dealers are members of the ______________,a self-regulatory body based in Zurich.

Accepted Answer

A) International Currency Market Association (ICM
A)  
B) International Bond Marketers Association (IBM
A)  
C) International Bond Regulators Association (IBR
A)  
D) International Capital Market Association (ICM
A)  
A) International Currency Market Association (ICM
A)  
B) International Bond Marketers Association (IBM
A)  
C) International Bond Regulators Association (IBR
A)  
D) International Capital Market Association (ICM
A)

Question 11

Eurobonds sold in the United States may not be sold to U.S.citizens.

Accepted Answer

A) True 
 B)False

Question 12

The secondary market for Eurobonds

Accepted Answer

A) is an over-the-counter market. 
B) is an organized exchange. 
C) has never developed-there is only a primary market for Eurobonds. 
A) is an over-the-counter market. 
B) is an organized exchange. 
C) has never developed-there is only a primary market for Eurobonds.

Question 13

In any given year,rightly 80 percent of new international bonds are likely to be

Accepted Answer

A) Eurobonds. 
B) foreign currency bonds. 
C) domestic bonds. 
D) none of the above 
A) Eurobonds. 
B) foreign currency bonds. 
C) domestic bonds. 
D) none of the above

Question 14

Your firm has just issued five-year floating-rate notes indexed to six-month U.S.dollar LIBOR plus 1/4 percent.What is the amount of the first coupon payment your firm will pay per U.S.$1,000 of face value,if six-month LIBOR is currently 7.2 percent?

Accepted Answer

A) $36.00 
B) $37.25 
C) $74.50 
D) None of the above 
A) $36.00 
B) $37.25 
C) $74.50 
D) None of the above

Question 15

A "global bond" issue

Accepted Answer

A) is a very large international bond offering by several borrowers pooled together. 
B) is a very large international bond offering by a single borrower that is simultaneously sold in several national bond markets. 
C) has higher yields for the purchasers. 
D) has a lower liquidity. 
A) is a very large international bond offering by several borrowers pooled together. 
B) is a very large international bond offering by a single borrower that is simultaneously sold in several national bond markets. 
C) has higher yields for the purchasers. 
D) has a lower liquidity.

Question 16

When the bond sells at par,the implicit SF/$ exchange rate at maturity of a Swiss franc/U.S.dollar dual currency bonds that pay $581.40 at maturity per SF1,000,is

Accepted Answer

A) SF0.58/$1.00 
B) SF1.58/$1.00 
C) SF1.72/$1.00 
D) SF1.95/$1.00 
A) SF0.58/$1.00 
B) SF1.58/$1.00 
C) SF1.72/$1.00 
D) SF1.95/$1.00

Question 17

Global bond issues

Accepted Answer

A) can save U.S.issuers 20 basis points relative to domestic bonds, all else equal. 
B) tend to have increased liquidity relative to Eurobonds or domestic bonds. 
C) have been partially facilitated by rule 144A. 
D) all of the above 
A) can save U.S.issuers 20 basis points relative to domestic bonds, all else equal. 
B) tend to have increased liquidity relative to Eurobonds or domestic bonds. 
C) have been partially facilitated by rule 144A. 
D) all of the above

Question 18

Euro-medium term notes

Accepted Answer

A) are typically fixed-rate corporate notes issued with maturities ranging from less than a year to about ten years. 
B) are typically fixed-rate corporate notes issued with maturities ranging from three years to about ten years. 
C) are sold just like bonds in the primary market. 
D) none of the above 
A) are typically fixed-rate corporate notes issued with maturities ranging from less than a year to about ten years. 
B) are typically fixed-rate corporate notes issued with maturities ranging from three years to about ten years. 
C) are sold just like bonds in the primary market. 
D) none of the above

Question 19

Floating rate notes behave differently in response to interest rate risk than straight fixed-rate bonds.

Accepted Answer

A) True since FRNs experience only mild price changes between reset dates, over which time the next period's coupon payment is fixed (assuming, of course, that the reference rate corresponds to the market rate applicable to the issuer). 
B) False since all bonds experience an inverse price change when the market rate of interest changes. 
C) None of the above 
A) True since FRNs experience only mild price changes between reset dates, over which time the next period's coupon payment is fixed (assuming, of course, that the reference rate corresponds to the market rate applicable to the issuer). 
B) False since all bonds experience an inverse price change when the market rate of interest changes. 
C) None of the above

Question 20

The floor value of a convertible bond

Accepted Answer

A) is the "straight bond" value. 
B) is the conversion value. 
C) is the minimum of a) and b). 
D) is the maximum of a) and b). 
A) is the "straight bond" value. 
B) is the conversion value. 
C) is the minimum of a) and b). 
D) is the maximum of a) and b).

The withholding tax on bond income was originally called the interest equalization tax.

Market makers in the secondary bond market

Floating-rate notes (FRN)

In contrast to many domestic bonds,which make _ coupon payments,coupon interest on Eurobonds is typically paid _

Consider a British pound-U.S.dollar dual currency bonds that pay £581.40 at maturity per $1,000 of par value.If at maturity,the exchange rate is $1.90 = £1.00,

A 1-year,4 percent pound denominated bond sells at par.A comparable risk 1-year,5.5 percent pound/dollar dual-currency bond pays $2,000 at maturity per £1,000 of face value.It sells for £900.What is the implied direct $/£ exchange rate at maturity?

Investors will generally accept a lower yield on than on __ of comparable terms,making them a less costly source of funds for the issuer to service.

The Wall Street Journal publishes daily values of yields to maturity for Japanese,German,British,and Canadian Government bonds.

Eurobond market makers and dealers are members of the ______________,a self-regulatory body based in Zurich.

Eurobonds sold in the United States may not be sold to U.S.citizens.

The secondary market for Eurobonds

In any given year,rightly 80 percent of new international bonds are likely to be

Your firm has just issued five-year floating-rate notes indexed to six-month U.S.dollar LIBOR plus 1/4 percent.What is the amount of the first coupon payment your firm will pay per U.S.$1,000 of face value,if six-month LIBOR is currently 7.2 percent?

A "global bond" issue

When the bond sells at par,the implicit SF/$ exchange rate at maturity of a Swiss franc/U.S.dollar dual currency bonds that pay $581.40 at maturity per SF1,000,is

Global bond issues

Euro-medium term notes

Floating rate notes behave differently in response to interest rate risk than straight fixed-rate bonds.

The floor value of a convertible bond

Globalization and the Multinational Firm

International Monetary System

Balance of Payments

Corporate Governance Around the World

The Market for Foreign Exchange

International Parity Relationships and Forecasting Foreign Exchange Rates

Futures and Options on Foreign Exchange

Management of Transaction Exposure

Management of Economic Exposure

Management of Translation Exposure

International Banking and Money Market

International Equity Markets

Interest Rate and Currency Swaps

International Portfolio Investment

Foreign Direct Investment and Cross-Border Acquisitions

International Capital Structure and the Cost of Capital

International Capital Budgeting

Multinational Cash Management

International Trade Finance

International Tax Environment and Transfer Pricing

Filters

Exam 12: International Bond Market

The withholding tax on bond income was originally called the interest equalization tax.

Market makers in the secondary bond market

Floating-rate notes (FRN)

In contrast to many domestic bonds,which make _________ coupon payments,coupon interest on Eurobonds is typically paid _________

Consider a British pound-U.S.dollar dual currency bonds that pay £581.40 at maturity per $1,000 of par value.If at maturity,the exchange rate is $1.90 = £1.00,

A 1-year,4 percent pound denominated bond sells at par.A comparable risk 1-year,5.5 percent pound/dollar dual-currency bond pays $2,000 at maturity per £1,000 of face value.It sells for £900.What is the implied direct $/£ exchange rate at maturity?

Investors will generally accept a lower yield on ________ than on __________ of comparable terms,making them a less costly source of funds for the issuer to service.

The Wall Street Journal publishes daily values of yields to maturity for Japanese,German,British,and Canadian Government bonds.

Eurobond market makers and dealers are members of the ______________,a self-regulatory body based in Zurich.

Eurobonds sold in the United States may not be sold to U.S.citizens.

The secondary market for Eurobonds

In any given year,rightly 80 percent of new international bonds are likely to be

Your firm has just issued five-year floating-rate notes indexed to six-month U.S.dollar LIBOR plus 1/4 percent.What is the amount of the first coupon payment your firm will pay per U.S.$1,000 of face value,if six-month LIBOR is currently 7.2 percent?

A "global bond" issue

When the bond sells at par,the implicit SF/$ exchange rate at maturity of a Swiss franc/U.S.dollar dual currency bonds that pay $581.40 at maturity per SF1,000,is

Global bond issues

Euro-medium term notes

Floating rate notes behave differently in response to interest rate risk than straight fixed-rate bonds.

The floor value of a convertible bond

Globalization and the Multinational Firm

International Monetary System

Balance of Payments

Corporate Governance Around the World

The Market for Foreign Exchange

International Parity Relationships and Forecasting Foreign Exchange Rates

Futures and Options on Foreign Exchange

Management of Transaction Exposure

Management of Economic Exposure

Management of Translation Exposure

International Banking and Money Market

International Equity Markets

Interest Rate and Currency Swaps

International Portfolio Investment

Foreign Direct Investment and Cross-Border Acquisitions

International Capital Structure and the Cost of Capital

International Capital Budgeting

Multinational Cash Management

International Trade Finance

International Tax Environment and Transfer Pricing

Filters

In contrast to many domestic bonds,which make _ coupon payments,coupon interest on Eurobonds is typically paid _

Investors will generally accept a lower yield on than on __ of comparable terms,making them a less costly source of funds for the issuer to service.