Question 1

A five-year,4 percent euro denominated bond sells at par.A comparable risk five-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) $1.2266/€1.00 
B) €0.8153/$1.00 
C) $1.25/€1.00 
D) $1.50/€1.00

Question 2

Unlike a bond issue,in which the entire issue is brought to market at once,_______ is partially sold on a continuous basis through an issuance facility that allows the borrower to obtain funds only as needed on a flexible basis.

Accepted Answer

A) a Euro-medium term note issue 
B) bearer bond 
C) a Euro-long term note issue 
D) a Euro-short term note issue

Question 3

With regard to clearing procedures for bond transactions

Accepted Answer

A) it is a system for transferring ownership of bonds. 
B) it is a system for ensuring payment from buyers to sellers. 
C) most Eurobond trades clear through two major clearing systems. 
D) all of the above

Question 4

Six-month U.S.dollar LIBOR is currently 4.375%; your firm issued floating-rate notes indexed to six-month U.S.dollar LIBOR plus 50 basis points.What is the amount of the next semi-annual coupon payment per U.S.$1,000 of face value?

Accepted Answer

A) $43.75 
B) $48.75 
C) $24.375 
D) $46.875

Question 5

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

Question 6

SEC Rule 144A

Accepted Answer

A) allows qualified institution investors in the United States to trade private placements. 
B) was designed to make the U.S.capital market more competitive with the Eurobond market. 
C) primarily, but not exclusively, impacts Yankee bonds. 
D) all of the above

Question 7

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

Accepted Answer

A) True 
 B)False

Question 8

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.

Question 9

The coupon interest on Eurobonds

Accepted Answer

A) is paid annually. 
B) is paid in cash. 
C) is paid in arrears. 
D) all of the above

Question 10

With regard to clearing procedures for bond transactions,when a transaction is conducted,electronic book entries are made that transfer book ownership of the bond certificates from the seller to the buyer and transfer funds from the purchaser's cash account to the seller's.However,

Accepted Answer

A) physical transfer of the bonds seldom takes place. 
B) the physical transfer of the bonds takes place as much as 3 days later. 
C) the physical transfer of the bonds takes place as much as 6 weeks later. 
D) the physical transfer of bonds only occurs if the depository banks that physically store bond certificates are different for the buyer and seller.

Question 11

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

Question 12

A "registered bond" is one that

Accepted Answer

A) shows the owner's name on the bond. 
B) the owner's name is recorded by the issuer. 
C) the owner's name is assigned to a bond serial number recorded by the issuer. 
D) all of the above

Question 13

On a reset date,floating-rate notes

Accepted Answer

A) experience very volatile price changes. 
B) market price will usually gravitate toward par. 
C) market price will usually gravitate toward par, unless the borrowers credit rating has declined. 
D) both b and c

Question 14

A 2-year,4 percent euro denominated bond sells at par.A comparable risk 2-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) €0.8265/$1.00 
B) $1.2099/€1.00 
C) $1.25/€1.00 
D) $1.50/€1.00

Question 15

Two major clearing systems for international bond transactions are

Accepted Answer

A) Euroclear and Clearstream International. 
B) Euroclear and Clearasil. 
C) Deutsche Börse Clearing and Cedel International. 
D) None of the above

Question 16

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.

Question 17

The shorter length of time in bringing a Eurodollar bond issue to market,coupled with the lower rate of interest that borrowers pay for Eurodollar bond financing in comparison to Yankee bond financing,are two major reasons why the Eurobond segment of the international bond market is roughly ________ the size of the foreign bond segment.

Accepted Answer

A) four times 
B) two times 
C) ten times 
D) one hundred times

Question 18

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.

Question 19

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

Exam 12: International Bond Market