Chapter 2 Quiz

In most countries, the bond market sector with the smallest amount of bonds outstanding is most likely the:

a. Government Sector
b. Financial Corporate Sector
C. Non-financial corporate sector
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In most countries, the bond market sector with the smallest amount of bonds outstanding is most likely the:

a. Government Sector
b. Financial Corporate Sector
C. Non-financial corporate sector
C. Non-financial corporate sector
The distinction between investment grade debt and non-investment grade debt is best described by differences in:

a. Tax status
b. Credit quality
c. Maturity dates
B. Credit quality
A bond issued internationally, outside the jurisdiction of the country in whose currency the bond is denominated, is best described as a:

a. Eurobond
b. Foreign bond
c. Municipal bond
A. Eurobond
When classified by type of issuer, asset-backed securities are part of the;

a. Corporate sector
B. Structured finance sector
c. Government and government-related sector
B. Structured finance sector
Compared with developed market bonds, emerging markets bonds will most likely:

a. Offer lower yields
b. Exhibit higher risk
c. Benefit from lower growth prospects
B. Exhibit higher risk
With respect to floating-rate bonds, a reference rate such as the London interbank offered rate (Libor) is most likely used to determine the bond's:

a. Spread
b. Coupon rate
c. Frequency of coupon payments
B. Coupon rate
The variability of the coupon rate on a Libor-based floating-rate bond is most likely due to:

a. Periodic resets of the reference rate
b. market-based reassessments of the issuer's creditworthiness
c. Changing estimates by the Libor administrator of borrowing capacity
A. Periodic resets of the reference rate
Which of the following statements is most accurate? An interbank offered rate:

a. is a single reference rate
b. applies to borrowing periods of up to 10 years
c. is used as a reference rate for interest rate swaps
C. is used as a reference rate for interest rate swaps
An investment bank that underwrites a bond issue most likely:

a. buys and resells the newly issued bonds to investors or dealers
b. acts as a broker and receives a commission for selling the bonds to investors
c. incurs less risk associated with selling the bonds than in a best efforts offering
a. 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 the public via a(n):

a. auction
b. private placement
c. best efforts offering
a. auction