Question 1

The Eurobond segment of the international bond market

Accepted Answer

A) is roughly four times the size of the foreign bond segment. 
B) has considerably less regulatory hurdles than the foreign bond segment. 
C) typically has a lower rate of interest that borrowers pay in comparison to Yankee bond financing. 
D) all of the above 
A) is roughly four times the size of the foreign bond segment. 
B) has considerably less regulatory hurdles than the foreign bond segment. 
C) typically has a lower rate of interest that borrowers pay in comparison to Yankee bond financing. 
D) all of the above

Question 2

A disproportionate share of Eurobonds have high credit ratings in comparison to domestic and foreign bonds.(Approximately 40 percent of Eurobond issues are rated AAA and 30 percent are AA).Explanations for this include

Accepted Answer

A) the issuers receiving low credit ratings invoke their publication rights and have had them withdrawn prior to dissemination. 
B) the Eurobond market is accessible only to firms that have good credit ratings and name recognition to begin with; hence, they are rated highly. 
C) there is "grade inflation" on the part of the bond rating agencies which are paid by the issuers and have to compete for business. 
D) both a and b 
A) the issuers receiving low credit ratings invoke their publication rights and have had them withdrawn prior to dissemination. 
B) the Eurobond market is accessible only to firms that have good credit ratings and name recognition to begin with; hence, they are rated highly. 
C) there is "grade inflation" on the part of the bond rating agencies which are paid by the issuers and have to compete for business. 
D) both a and b

Question 3

Zero-coupon bonds issued in 2006 are due in 2016.If they were originally sold at 55 percent of face value,the implied yield to maturity at issuance is

Accepted Answer

A) 1.062%. 
B) 6.16%. 
C) 8.31%. 
D) cannot be determined, need more information. 
A) 1.062%. 
B) 6.16%. 
C) 8.31%. 
D) cannot be determined, need more information.

Question 4

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 5

With regard to dual-currency bonds versus comparable straight fixed-rate bonds,

Accepted Answer

A) dual currency bonds usually trade at a premium to reflect the value of the forward contract implicit in their repayment schedule. 
B) the interest on dual-currency bonds is usually lower than on comparable straight fixed-rate debt. 
C) the interest on dual-currency bonds is usually higher than on comparable straight fixed-rate debt. 
D) none of the above 
A) dual currency bonds usually trade at a premium to reflect the value of the forward contract implicit in their repayment schedule. 
B) the interest on dual-currency bonds is usually lower than on comparable straight fixed-rate debt. 
C) the interest on dual-currency bonds is usually higher than on comparable straight fixed-rate debt. 
D) none of the above

Question 6

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 7

There are two types of equity related bonds:

Accepted Answer

A) convertible bonds and dual currency bonds. 
B) convertible bonds and kitchen sink bonds. 
C) convertible bonds and bonds with equity warrants. 
D) callable bonds and exchangeable bonds. 
A) convertible bonds and dual currency bonds. 
B) convertible bonds and kitchen sink bonds. 
C) convertible bonds and bonds with equity warrants. 
D) callable bonds and exchangeable bonds.

Question 8

Purchasers of global bonds are

Accepted Answer

A) mainly institutional investors to date. 
B) desirous of the increased liquidity of the issues. 
C) have been willing to accept lower yields. 
D) all of the above 
A) mainly institutional investors to date. 
B) desirous of the increased liquidity of the issues. 
C) have been willing to accept lower yields. 
D) all of the above

Question 9

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 10

"Yankee" bonds are

Accepted Answer

A) dollar-denominated foreign bonds originally sold to U.S.investors. 
B) yen-denominated foreign bonds originally sold in Japan. 
C) pound sterling-denominated foreign bonds originally sold in the U.K. 
D) none of the above 
A) dollar-denominated foreign bonds originally sold to U.S.investors. 
B) yen-denominated foreign bonds originally sold in Japan. 
C) pound sterling-denominated foreign bonds originally sold in the U.K. 
D) none of the above

Question 11

A five-year,4 percent Euroyen bond sells at par.A comparable risk five-year,5.5 percent yen/dollar dual-currency bond pays $833.33 at maturity per ¥100,000 of face value.It sells for ¥110,000.What is the implied ¥/$ exchange rate at maturity?

Accepted Answer

A) ¥131/$1.00 
B) ¥120/$1.00 
C) ¥110/$1.00 
D) ¥103/$1.00 
A) ¥131/$1.00 
B) ¥120/$1.00 
C) ¥110/$1.00 
D) ¥103/$1.00

Question 12

A ten-year Floating-rate note (FRN)has coupons referenced to 3-month pound LIBOR,and pays coupon interest quarterly.Assume that the current 3-month LIBOR is 3 percent.If the risk premium above LIBOR that the issuer must pay is 1/8 percent,the next period's coupon rate on a £1,000 face value FRN will be

Accepted Answer

A) £31.25 
B) £15.625 
C) £30.625 
D) £7.8125 
A) £31.25 
B) £15.625 
C) £30.625 
D) £7.8125

Question 13

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 14

Find the price of a 30-year zero coupon bond with a €1,000 par value that has a yield to maturity of i€ = 5 percent.

Accepted Answer

A) €231.38 
B) €432.20 
C) €4,321.94 
D) none of the above 
A) €231.38 
B) €432.20 
C) €4,321.94 
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

Zero coupon bonds

Accepted Answer

A) have no interest income. 
B) are sold at a premium to par value. 
C) gave only capital gains income. 
D) both a and c 
A) have no interest income. 
B) are sold at a premium to par value. 
C) gave only capital gains income. 
D) both a and c

Question 17

The J.P.Morgan and Company Global Government Bond Index is __________ representation of the individual country government bond indexes.

Accepted Answer

A) a value weighted 
B) a price weighted 
C) an unweighted 
A) a value weighted 
B) a price weighted 
C) an unweighted

Question 18

Straight fixed-rate bond issues have

Accepted Answer

A) a designated maturity date at which the principal of the bond issue is promised to be repaid.During the life of the bond, fixed coupon payments, which are a percentage of the face value, are paid as interest to the bondholders. 
B) a designated maturity date at which the principal of the bond issue is promised to be repaid.During the life of the bond, coupon payments, which are a percentage of the face value, are computed according to a fixed formula. 
C) a fixed payment, which amortizes the debt, like a house payment or car payment. 
D) none of the above 
A) a designated maturity date at which the principal of the bond issue is promised to be repaid.During the life of the bond, fixed coupon payments, which are a percentage of the face value, are paid as interest to the bondholders. 
B) a designated maturity date at which the principal of the bond issue is promised to be repaid.During the life of the bond, coupon payments, which are a percentage of the face value, are computed according to a fixed formula. 
C) a fixed payment, which amortizes the debt, like a house payment or car payment. 
D) none of the above

Question 19

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 20

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

The Eurobond segment of the international bond market

A disproportionate share of Eurobonds have high credit ratings in comparison to domestic and foreign bonds.(Approximately 40 percent of Eurobond issues are rated AAA and 30 percent are AA).Explanations for this include

Zero-coupon bonds issued in 2006 are due in 2016.If they were originally sold at 55 percent of face value,the implied yield to maturity at issuance is

Global bond issues

With regard to dual-currency bonds versus comparable straight fixed-rate bonds,

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?

There are two types of equity related bonds:

Purchasers of global bonds are

Market makers in the secondary bond market

"Yankee" bonds are

A five-year,4 percent Euroyen bond sells at par.A comparable risk five-year,5.5 percent yen/dollar dual-currency bond pays $833.33 at maturity per ¥100,000 of face value.It sells for ¥110,000.What is the implied ¥/$ exchange rate at maturity?

The secondary market for Eurobonds

Find the price of a 30-year zero coupon bond with a €1,000 par value that has a yield to maturity of i_€ = 5 percent.

A "global bond" issue

Zero coupon bonds

The J.P.Morgan and Company Global Government Bond Index is __________ representation of the individual country government bond indexes.

Straight fixed-rate bond issues have

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

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 Eurobond segment of the international bond market

A disproportionate share of Eurobonds have high credit ratings in comparison to domestic and foreign bonds.(Approximately 40 percent of Eurobond issues are rated AAA and 30 percent are AA).Explanations for this include

Zero-coupon bonds issued in 2006 are due in 2016.If they were originally sold at 55 percent of face value,the implied yield to maturity at issuance is

Global bond issues

With regard to dual-currency bonds versus comparable straight fixed-rate bonds,

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?

There are two types of equity related bonds:

Purchasers of global bonds are

Market makers in the secondary bond market

"Yankee" bonds are

A five-year,4 percent Euroyen bond sells at par.A comparable risk five-year,5.5 percent yen/dollar dual-currency bond pays $833.33 at maturity per ¥100,000 of face value.It sells for ¥110,000.What is the implied ¥/$ exchange rate at maturity?

The secondary market for Eurobonds

Find the price of a 30-year zero coupon bond with a €1,000 par value that has a yield to maturity of i€ = 5 percent.

A "global bond" issue

Zero coupon bonds

The J.P.Morgan and Company Global Government Bond Index is __________ representation of the individual country government bond indexes.

Straight fixed-rate bond issues have

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

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

Find the price of a 30-year zero coupon bond with a €1,000 par value that has a yield to maturity of i_€ = 5 percent.