Question 1

The vast majority of new international bond offerings

Accepted Answer

A) are straight fixed-rate notes. 
B) are callable and convertible. 
C) are convertible adjustable rate. 
D) are adjustable rate, with interest rate caps and collars. 
A) are straight fixed-rate notes. 
B) are callable and convertible. 
C) are convertible adjustable rate. 
D) are adjustable rate, with interest rate caps and collars. A

Question 2

A 1-year,4 percent euro denominated bond sells at par.A comparable risk 1-year,5.5 percent euro/dollar dual-currency bond pays $1,500 at maturity per €1,000 of face value.It sells for €1,250.What is the implied $/€ exchange rate at maturity?

Accepted Answer

A) €0.8300/$1.00 
B) $1.2048/€1.00 
C) $1.25/€1.00 
D) $1.50/€1.00 
A) €0.8300/$1.00 
B) $1.2048/€1.00 
C) $1.25/€1.00 
D) $1.50/€1.00 B

Question 3

The role of an underwriter is to

Accepted Answer

A) help negotiate terms with the borrower. 
B) ascertain market conditions. 
C) manage the issuance. 
D) all of the above. 
A) help negotiate terms with the borrower. 
B) ascertain market conditions. 
C) manage the issuance. 
D) all of the above. D

Question 4

Find the present value of a 30-year bond that pays an annual coupon,has a coupon rate of 6%,a yield to maturity of 5%,a par value of €1,000 when the yield to maturity is 5%.

Accepted Answer

A) €1,018.81 
B) €1,027.23 
C) €1,153.73 
D) none of the above 
A) €1,018.81 
B) €1,027.23 
C) €1,153.73 
D) none of the above

Question 5

Standard & Poor's has for years provided credit ratings on international bonds.

Accepted Answer

A) The ratings reflect the safety of principal for a U.S.investor. 
B) Their ratings reflect the creditworthiness of the borrower and not exchange rate uncertainty. 
C) Their ratings reflect creditworthiness of the lender and predict the exchange rate expected to prevail at maturity. 
D) The ratings are biased since 40 percent of Eurobond issues are rated AAA and 30 percent are AA. 
A) The ratings reflect the safety of principal for a U.S.investor. 
B) Their ratings reflect the creditworthiness of the borrower and not exchange rate uncertainty. 
C) Their ratings reflect creditworthiness of the lender and predict the exchange rate expected to prevail at maturity. 
D) The ratings are biased since 40 percent of Eurobond issues are rated AAA and 30 percent are AA.

Question 6

Find the value today of a 2-year dual currency bond with annual coupons (paid in U.S.dollars at a 5 percent coupon rate)that pays £500 per $1,000 par value at maturity.The cash flows of the bond are:  
 The dollar-based yield to maturity is i$ = 3%; the spot exchange rate is $1.80 = £1.00; expected inflation over the next three years is $\pi$$ = 2% in the U.S.and $\pi$£ = 3% in the U.K.

Accepted Answer

A) $927.62 
B) $941.30 
C) $965.06 
D) $599.00 
A) $927.62 
B) $941.30 
C) $965.06 
D) $599.00

Question 7

Find the value today of a 2-year dual currency bond with annual coupons (paid in U.S.dollars at a 5 percent coupon rate)that pays £500 per $1,000 par value at maturity.The cash flows of the bond are:   The dollar-based yield to maturity is i$ = 3%; the spot exchange rate is $1.80 = £1.00; the pound-based yield to maturity is i£ = 4%.

Accepted Answer

A) $927.77 
B) $941.30 
C) $965.06 
D) $880.65 
A) $927.77 
B) $941.30 
C) $965.06 
D) $880.65

Question 8

One unintended consequence of Sarbanes-Oxley

Accepted Answer

A) is that international companies are starting to prefer issuing eurobonds in the private placement market in the U.S.to avoid costly information disclosure required of registered bonds. 
B) is that international companies are starting to prefer to issue Yankee bonds in the private placement market in the U.S. 
C) is that international companies are starting to prefer issuing Yankee bonds in the bearer bond market in the U.S.to avoid costly information disclosure required of registered bonds. 
D) is that international companies have left the bond market in the U.S.to avoid costly information disclosure required of registered bonds. 
A) is that international companies are starting to prefer issuing eurobonds in the private placement market in the U.S.to avoid costly information disclosure required of registered bonds. 
B) is that international companies are starting to prefer to issue Yankee bonds in the private placement market in the U.S. 
C) is that international companies are starting to prefer issuing Yankee bonds in the bearer bond market in the U.S.to avoid costly information disclosure required of registered bonds. 
D) is that international companies have left the bond market in the U.S.to avoid costly information disclosure required of registered bonds.

Question 9

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 10

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.

Question 11

Suppose your firm issues a €100,000,000 one-year bond with a coupon rate of 8 percent per annum.The underwriting spread is 2 percent.Your actual cost of this debt is

Accepted Answer

A) 8 percent. 
B) 10 percent. 
C) 10.2 percent. 
D) None of the above 
A) 8 percent. 
B) 10 percent. 
C) 10.2 percent. 
D) None of the above

Question 12

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

Accepted Answer

A) You can thank John 
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 
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 13

In any year,the Eurobond segment of the international bond market accounts for approximately what percent of new bond offering?

Accepted Answer

A) 10% 
B) 25% 
C) 50% 
D) 80% 
A) 10% 
B) 25% 
C) 50% 
D) 80%

Question 14

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 otherwise identical non-convertible debt is 6.5%.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 $20.What is the floor value of this bond?

Accepted Answer

A) $800.00 
B) $892.17 
C) $1,250 
D) None of the above 
A) $800.00 
B) $892.17 
C) $1,250 
D) None of the above

Question 15

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 16

With a bearer bond,

Accepted Answer

A) possession is evidence of ownership. 
B) the issuer keeps records indicating only who the current owner of a bond is. 
C) the owner's name is on the bond. 
D) the owner's name is assigned to the bond serial number, but not indicated on the bond. 
A) possession is evidence of ownership. 
B) the issuer keeps records indicating only who the current owner of a bond is. 
C) the owner's name is on the bond. 
D) the owner's name is assigned to the bond serial number, but not indicated on the bond.

Question 17

Global bond issues were first offered in

Accepted Answer

A) 1889 
B) 1989 
C) 1999 
D) 2007 
A) 1889 
B) 1989 
C) 1999 
D) 2007

Question 18

Eurobonds are usually

Accepted Answer

A) bearer bonds. 
B) registered bonds. 
C) bulldog bonds. 
D) foreign currency bonds. 
A) bearer bonds. 
B) registered bonds. 
C) bulldog bonds. 
D) foreign currency bonds.

Question 19

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 20

Underwriters for a domestic bond issue will commit their own capital to buy the issue from the borrower at a discount from the issue price.The discount,or underwriting spread,is typically

Accepted Answer

A) in the 1 to 1.5 percent range. 
B) in the 2 to 2.5 percent range. 
C) in the 3 to 3.5 percent range. 
D) in the 4 to 4.5 percent range. 
A) in the 1 to 1.5 percent range. 
B) in the 2 to 2.5 percent range. 
C) in the 3 to 3.5 percent range. 
D) in the 4 to 4.5 percent range.

The vast majority of new international bond offerings

A 1-year,4 percent euro denominated bond sells at par.A comparable risk 1-year,5.5 percent euro/dollar dual-currency bond pays $1,500 at maturity per €1,000 of face value.It sells for €1,250.What is the implied $/€ exchange rate at maturity?

The role of an underwriter is to

Find the present value of a 30-year bond that pays an annual coupon,has a coupon rate of 6%,a yield to maturity of 5%,a par value of €1,000 when the yield to maturity is 5%.

Standard & Poor's has for years provided credit ratings on international bonds.

One unintended consequence of Sarbanes-Oxley

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 floor value of a convertible bond

Suppose your firm issues a €100,000,000 one-year bond with a coupon rate of 8 percent per annum.The underwriting spread is 2 percent.Your actual cost of this debt is

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

In any year,the Eurobond segment of the international bond market accounts for approximately what percent of new bond offering?

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

With a bearer bond,

Global bond issues were first offered in

Eurobonds are usually

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

Underwriters for a domestic bond issue will commit their own capital to buy the issue from the borrower at a discount from the issue price.The discount,or underwriting spread,is typically

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 vast majority of new international bond offerings

A 1-year,4 percent euro denominated bond sells at par.A comparable risk 1-year,5.5 percent euro/dollar dual-currency bond pays $1,500 at maturity per €1,000 of face value.It sells for €1,250.What is the implied $/€ exchange rate at maturity?

The role of an underwriter is to

Find the present value of a 30-year bond that pays an annual coupon,has a coupon rate of 6%,a yield to maturity of 5%,a par value of €1,000 when the yield to maturity is 5%.

Standard & Poor's has for years provided credit ratings on international bonds.

One unintended consequence of Sarbanes-Oxley

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 floor value of a convertible bond

Suppose your firm issues a €100,000,000 one-year bond with a coupon rate of 8 percent per annum.The underwriting spread is 2 percent.Your actual cost of this debt is

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

In any year,the Eurobond segment of the international bond market accounts for approximately what percent of new bond offering?

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

With a bearer bond,

Global bond issues were first offered in

Eurobonds are usually

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

Underwriters for a domestic bond issue will commit their own capital to buy the issue from the borrower at a discount from the issue price.The discount,or underwriting spread,is typically

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

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.