Question 1

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 2

Find the yield to maturity for this floating rate note: The reset date is today; coupons are paid annually according to the formula (LIBOR + ¼ percent); since issuance, there has not been a change in the issuer's credit rating. The bond has ten years to maturity and LIBOR = 3.5 percent.

Accepted Answer

A) 3.5% 
B) 4% 
C) 3.75% 
D) There is not enough information provided to make a determination. 
A) 3.5% 
B) 4% 
C) 3.75% 
D) There is not enough information provided to make a determination.

Question 3

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 4

Underwriters for an international 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.

Question 5

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 6

Floating-rate notes

Accepted Answer

A) are a form of adjustable rate bond. 
B) have contractually specified coupon payments, therefore they are fixed rate bonds. 
C) always trade at par value. 
D) both a and c 
A) are a form of adjustable rate bond. 
B) have contractually specified coupon payments, therefore they are fixed rate bonds. 
C) always trade at par value. 
D) both a and c

Question 7

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.

Question 8

Bonds with equity warrants

Accepted Answer

A) are really the same as convertible bonds if the prestated price of exercising the warrant is the par value of the bond. 
B) can be viewed as straight debt with a call option (technically a warrant) attached. 
C) can only be exercised on coupon dates. 
D) typically are convertible as well. 
A) are really the same as convertible bonds if the prestated price of exercising the warrant is the par value of the bond. 
B) can be viewed as straight debt with a call option (technically a warrant) attached. 
C) can only be exercised on coupon dates. 
D) typically are convertible as well.

Question 9

Investors in corporate bonds would still be interested in sovereign credit ratings

Accepted Answer

A) because the sovereign credit rating usually represents a ceiling on corporate credit ratings within that country. 
B) because they might play the TED spread. 
C) because they are the rating assigned by the country's regulators. 
D) none of the above 
A) because the sovereign credit rating usually represents a ceiling on corporate credit ratings within that country. 
B) because they might play the TED spread. 
C) because they are the rating assigned by the country's regulators. 
D) none of the above

Question 10

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.

Question 11

The four currencies in which the majority of domestic and international bonds are denominated are

Accepted Answer

A) U.S. dollar, the euro, the Indian rupee, and the Chinese Yuan. 
B) U.S. dollar, the euro, the pound sterling, and the Swiss franc. 
C) U.S. dollar, the euro, the Swiss franc, and the yen. 
D) U.S. dollar, the euro, the pound sterling, and the yen. 
A) U.S. dollar, the euro, the Indian rupee, and the Chinese Yuan. 
B) U.S. dollar, the euro, the pound sterling, and the Swiss franc. 
C) U.S. dollar, the euro, the Swiss franc, and the yen. 
D) U.S. dollar, the euro, the pound sterling, and the yen.

Question 12

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 13

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 14

A "foreign bond" issue is

Accepted Answer

A) one denominated in a particular currency but sold to investors in national capital markets other than the country that issued the denominating currency. 
B) one offered by a foreign borrower to investors in a national market and denominated in that nation's currency. 
C) for example, a German MNC issuing dollar-denominated bonds to U.S. investors. 
D) both b and c 
A) one denominated in a particular currency but sold to investors in national capital markets other than the country that issued the denominating currency. 
B) one offered by a foreign borrower to investors in a national market and denominated in that nation's currency. 
C) for example, a German MNC issuing dollar-denominated bonds to U.S. investors. 
D) both b and c

Question 15

In the bond market, there are brokers and market makers. Which of the following are true?

Accepted Answer

A) Brokers accept buy or sell orders from market makers and then attempt to find a matching party for the other side of the trade; they may also trade for their own account. 
B) Brokers charge a small commission for their services to the market maker that engaged them. 
C) Brokers do not deal directly with retail clients. 
D) All of the above 
A) Brokers accept buy or sell orders from market makers and then attempt to find a matching party for the other side of the trade; they may also trade for their own account. 
B) Brokers charge a small commission for their services to the market maker that engaged them. 
C) Brokers do not deal directly with retail clients. 
D) All of the above

Question 16

Consider a bond with an equity warrant. The warrant entitles the bondholder to buy 25 shares of the issuer at €50 per share for the lifetime of the bond. The bond is a 30-year zero coupon bond with a €1,000 par value that has a yield to maturity of i€ = 5 percent. The price of the bond is €500. What is the value of the warrant?

Accepted Answer

A) €231.38 
B) €268.62 
C) €500 
D) none of the above 
A) €231.38 
B) €268.62 
C) €500 
D) none of the above

Question 17

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 $1.80 = £1.00; expected inflation over the next three years is π$ = 2% in the U.S. and π£ = 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 18

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 19

A five-year floating-rate note has coupons referenced to six-month dollar LIBOR, and pays coupon interest semiannually. Assume that the current six-month LIBOR is 6 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) $29.375 
B) $30.000 
C) $30.625 
D) $61.250 
A) $29.375 
B) $30.000 
C) $30.625 
D) $61.250

Question 20

In any given year, about what percent of outstanding bonds are likely to be international rather than domestic bonds?

Accepted Answer

A) 70% 
B) 50% 
C) 30% 
D) 5% 
A) 70% 
B) 50% 
C) 30% 
D) 5%

Global bond issues

Find the yield to maturity for this floating rate note: The reset date is today; coupons are paid annually according to the formula (LIBOR + ¼ percent); since issuance, there has not been a change in the issuer's credit rating. The bond has ten years to maturity and LIBOR = 3.5 percent.

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

Underwriters for an international 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

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

Floating-rate notes

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

Bonds with equity warrants

Investors in corporate bonds would still be interested in sovereign credit ratings

The vast majority of new international bond offerings

The four currencies in which the majority of domestic and international bonds are denominated are

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

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.

A "foreign bond" issue is

In the bond market, there are brokers and market makers. Which of the following are true?

The secondary market for Eurobonds

In any given year, about what percent of outstanding bonds are likely to be international rather than domestic bonds?

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

Global bond issues

Find the yield to maturity for this floating rate note: The reset date is today; coupons are paid annually according to the formula (LIBOR + ¼ percent); since issuance, there has not been a change in the issuer's credit rating. The bond has ten years to maturity and LIBOR = 3.5 percent.

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

Underwriters for an international 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

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

Floating-rate notes

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

Bonds with equity warrants

Investors in corporate bonds would still be interested in sovereign credit ratings

The vast majority of new international bond offerings

The four currencies in which the majority of domestic and international bonds are denominated are

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

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.

A "foreign bond" issue is

In the bond market, there are brokers and market makers. Which of the following are true?

The secondary market for Eurobonds

In any given year, about what percent of outstanding bonds are likely to be international rather than domestic bonds?

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.