Final Exam Debt & Money Market 2023-2024

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Nov 14, 2023
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FINAL EXAM DEBT & MONEY MARKET 2023 - 2024 A sovereign bond has a maturity of 20 years. The bond is best described as a: - capital market security A company has issued a floating-rate note with a coupon rate equal to the three-month Libor + 55 basis points. Interest payments are made quarterly on 31 March, 30 June, 30 September, and 31 December. On 31 March and 30 June, the three-month Libor is 1.55% and 1.35%, respectively. The coupon rate for the interest payment made on 30 June is: - 2.10% A South African company issues bonds denominated in pound sterling that are sold toinvestors in the United Kingdom. These bonds can be best described as: - foreign bonds An investor in a country with an original issue discount tax provision purchases a 20-yearzero- coupon bond at a deep discount to par value. The investor plans to hold the bonduntil the maturity date. The investor will most likely report: - taxable income from the bond every year until maturity Investors who believe that interest rates will rise most likely prefer to invest in: - floating-rate notes The provision that provides bondholders the right to sell the bond back to the issuer at a predetermined price prior to the bond's maturity date is referred to as: - a put provision Which of the following provisions is a benefit to the issuer? - call provision Relative to an otherwise similar option-free bond, a: - putable bond will trade at a higher price The distinction between investment grade debt and non-investment grade debt is bestdescribed by differences in: - credit quality With respect to floating-rate bonds, a reference rate such as the London interbank offeredrate (Libor) is most likely used to determine the bond's: - coupon rate An investment bank that underwrites a bond issue most likely: - buys and resells the newly issued bonds to investors or dealers In major developed bond markets, newly issued sovereign bonds are most often sold to thepublic via a(n): - auction
A bond market in which a communications network matches buy and sell orders initiatedfrom various locations is best described as an: - over-the-counter market Sovereign bonds are best described as: - bonds backed by the taxing authority of a national government A liquid secondary bond market allows an investor to sell a bond at: - a price close to the bond's fair market value Which of the following statements relating to commercial paper is most accurate? - Commercial paper is a source of interim financing for long-term projects The type of bond issued by a multilateral agency such as the International Monetary Fund(IMF) is best described as a: - supranational bond The three-year fixed-income security that is issued by the Department of Treasury is best described as: - treasury notes A one year, capital-indexed bond linked to the Consumer Price Index (CPI) is issued witha coupon rate of 8% and a par value of 1,000. The bond pays interest semi-annually.During the first six months after the bond's issuance, the CPI increases by 2%. On thefirst coupon payment date, the bond's: - principal amount increases to 1,020 Assume a convertible bond is issued by Apple at price $1000 and the conversion ratio is 10. The stock price is $90. What is the conversion premium? - 100 A bond offers an annual coupon rate of 4%, with interest paid semiannually. The bondmatures in two years. At a market discount rate of 6%, the price of this bond per 100 ofpar value is closest to: - 96.28 Suppose a bond's price is expected to increase by 5% if its market discount rate decreases by 100 bps. If the bond's market discount rate increases by 100 bps, the bond price is most likely to change by: - less than 5% Which of the following statements describing a par curve is incorrect? - All bonds on a par curve are assumed to have different credit risk A yield curve constructed from a sequence of yields-to-maturity on zero-coupon bonds is the: - spot curve An investor considers the purchase of a 2-year bond with a 5% coupon rate, with interest paid annually. Assuming the 1-year spot rate is 3%, the 2-year spot rate is 4%, the price of the bond is closest to: - 101.93
A 3-year bond offers a 6% coupon rate with interest paid annually. Assume the 1-year spot rate is 8%, the 2-year spot rate is 9%, the 3-year spot rate is 10%, the yield-to-maturity of the bond is closet to: - 9.92% Bond dealers most often quote the: - flat price A 6% German corporate bond is priced for settlement on 19 June 2015. The bond makes semiannual coupon payments on 19 March and 19 September of each year and matures on 19 September 2026. Using the 30/360 day-count convention, and if the YTM of the bond is 8%, the flat price of the bond is closet to: - 85.33 The annual yield-to-maturity, stated for with a periodicity of 12, for a 4-year, zero-coupon bond priced at 75 per 100 of par value is closest to: - 7.21% A 5-year, 5% semiannual coupon payment corporate bond is priced at 104.967 per 100of par value. The bond's yield-to-maturity, quoted on a semiannual bond basis, is 3.897%.An analyst has been asked to convert to a monthly periodicity. Under this conversion, theyield-to-maturity is closest to: - 3.87% To raise the federal funds rate, the Fed most likely to: - borrow cash reserves from banks Assume the 1-year spot rate is 8%, the 2-year spot rate is 9%, the 3-year spot rate is 10%, the three-year zero price is closet to: - 0.7513 Assume the two-year zero price is 0.90, the 2-year spot rate is closet to: - 5.41% Assume the one-year zero price is 0.9259, the price of a 2-year 10% annual coupon-paying bond is 109.259. The two-year zero price is closet to: - 0.9091 Assume the 1-year spot rate is 5%, the price of a 2-year 10% annual coupon-paying bond is 105.602. The two-year zero price is closet to: - 0.8734 Given spot rates for one-, two-, and three-year zero coupon bonds, how many forwardrates can be calculated? - 3 Consider spot rates for three zero-coupon bonds: r(1) = 3%, r(2) = 4%, and r(3) = 5%.Which statement is correct? The forward rate for a one-year loan beginning in one yearwill be: - less than the forward rate for a one-year loan beginning in two-years The one-year spot rate r(1) = 4%, the forward rate for a one-year loan beginning in oneyear is 6%, and the forward rate for a one-year loan beginning in two years is 8%. Whichof the following rates is closest to the three-year spot rate? - 6.0%
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