Question: Which of the following factors influence which sectors of the bond market institutions invest in?
Select an Answer: the nature of the institution's asset structure the tax code applicable to the institution the nature of the institution's earnings structure the nature of the institution's equity finance
Rationale:
The two factors which influence which sectors of the bond market institutions invest in are (1)the tax code applicable to the institution and (2)the nature of the institution's liability structure. For instance, because pension funds are subject to little tax and have long-term commitments, they prefer high-yielding, long-term corporate or government bonds.
2024-09-15
Question: The par value on a bond is:
Select an Answer: an arbitrary value assigned to it for tax purposes. none of these answers. the present value of the interest and principal payments. the present value of the principal payment. the principal due on maturity.
Rationale:
The par value is the principal payment that is due to the holder on maturity of the bond. It is the original value of the obligation and is not the same as the bond's market value. Par value differs from market value because of differences between the bond's coupon rate and the prevailing market rate of interest.
2024-09-14
Question: Indenture provisions most likely:
Select an Answer: are left to the bondholders to enforce. Indenture provisions include deferred call provisions, which allow the issuer to retire the issue up to a certain period of time. A deferred call provision is like a freely callable provision that is limited to only the first years of the issue. are enforced by a trustee acting on behalf of the bondholders. Indenture provisions include noncallable provisions, which prohibit the issuer from retiring the issue before its maturity. are enforced by a trustee acting on behalf of the bondholders. Indenture provisions include call provisions, which allow the bondholder to swap the bond for a predetermined number of shares. Call provisions increase the price of the issue. are left to the bondholders to enforce. In the case of provisions stipulating registered bonds, the bondholder must report any changes in address in order to receive interest and principal payments. Registered bonds are priced less than other bonds.
Rationale:
Indenture provisions specify the issuer's legal requirements. They are enforced by a trustee (usually a bank) acting on the behalf of the bondholders.
A callable provision allows the issuer to retire the issue at any time. A deferred call provision allows the issuer to retire the issue after a certain amount of time. A noncallable provision prohibits the issuer from retiring the issue prior to its maturity.
2024-09-13
Question: U.K. foreign bonds are known as ________ bonds.
Select an Answer: Bulldog Eurosterling Eurodollar Yankee
Rationale:
Bulldog bonds are sterling-denominated bonds issued in the U.K. by a non-British issuer.
Eurosterling bonds are sterling-denominated Eurobonds sold in markets outside of London. The Eurosterling bond market is much larger than the bulldog bond market.
Yankee bonds are foreign bonds in the U.S. market.
Eurodollars are not bonds. Rather, they are dollars deposited outside of the United States.
2024-09-12
Question: An indenture is:
Select an Answer: the contract between the issuer and the bondholder specifying the issuer's legal requirements. the SEC document that must be completed before any bond can be issued. a provision allowing the bondholder to swap the bond for a predetermined number of shares of stock. a provision allowing the issuer to retire the bond prior to its maturity.
Rationale:
An indenture indicates the bond's features, its type, and its maturity. A call feature is not an indenture, per se, but can be included in the indenture provision. A trustee (most often a bank), acts on behalf of the bondholder to enforce the provisions of the indenture.
