HW#1 Defining Elements: FIN240 Fixed Income - SECTION 90

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Apr 3, 2024

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2/5/24, 3 : 53 PM HW: Defining Elements: FIN240 Fixed Income - SECTION 90 Page 1 of 10 https://csus.instructure.com/courses/117655/quizzes/538403 ? headless=1 HW: Defining Elements Due Feb 25 at 11:59pm Points 20 Questions 20 Time Limit None Allowed Attempts 3 Attempt History Attempt Time Score KEPT Attempt 2 2 minutes 20 out of 20 LATEST Attempt 2 2 minutes 20 out of 20 Attempt 1 8 minutes 19 out of 20 Answers will be shown after your last attempt Score for this attempt: 20 out of 20 Submitted Feb 5 at 3:52pm This attempt took 2 minutes. Take the Quiz Again 1 / 1 pts Question 1 An example of a sovereign bond is a bond issued by: the World Bank. the city of New York. the federal German government.
2/5/24, 3 : 53 PM HW: Defining Elements: FIN240 Fixed Income - SECTION 90 Page 2 of 10 https://csus.instructure.com/courses/117655/quizzes/538403 ? headless=1 1 / 1 pts Question 2 The risk of loss resulting from the issuer failing to make full and timely payment of interest is called: interest rate risk. credit risk. systemic risk. 1 / 1 pts Question 3 A money market security most likely matures in: one year or less. over 10 years. between 1 and 10 years. 1 / 1 pts Question 4 If the bond’s price is higher than its par value, the bond is trading at:
2/5/24, 3 : 53 PM HW: Defining Elements: FIN240 Fixed Income - SECTION 90 Page 3 of 10 https://csus.instructure.com/courses/117655/quizzes/538403 ? headless=1 a premium. par. a discount. 1 / 1 pts Question 5 A bond has a par value of £100 and a coupon rate of 5%. Coupon payments are made semi-annually. The periodic interest payment is: £2.50, paid twice a year. £5.00, paid once a year. £5.00, paid twice a year. 1 / 1 pts Question 6 The coupon rate of a floating-rate note that makes payments in June and December is expressed as six-month MRR + 25 bps. Assuming that the six-month MRR is 3.00% at the end of June 20XX and 3.50% at the end of December 20XX, the interest rate that applies to the payment due in December 20XX is: 3.50%.
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2/5/24, 3 : 53 PM HW: Defining Elements: FIN240 Fixed Income - SECTION 90 Page 4 of 10 https://csus.instructure.com/courses/117655/quizzes/538403 ? headless=1 3.75%. 3.25%. 1 / 1 pts Question 7 The type of bond that allows bondholders to choose the currency in which they receive each interest payment and principal repayment is a: dual-currency bond. pure discount bond. currency option bond. 1 / 1 pts Question 8 The term most likely used to refer to the legal contract under which a bond is issued is: indenture. debenture. letter of credit.
2/5/24, 3 : 53 PM HW: Defining Elements: FIN240 Fixed Income - SECTION 90 Page 5 of 10 https://csus.instructure.com/courses/117655/quizzes/538403 ? headless=1 1 / 1 pts Question 9 The individual or entity that most likely assumes the role of trustee for a bond issue is: the treasurer or chief financial officer of the issuer. a financial institution appointed by a regulatory authority. a financial institution appointed by the issuer. 1 / 1 pts Question 10 The individual or entity most likely responsible for the timely payment of interest and repayment of principal to bondholders is the: primary or lead bank of the issuer. treasurer or chief financial officer of the issuer. trustee. 1 / 1 pts Question 11 An example of an affirmative covenant is the requirement:
2/5/24, 3 : 53 PM HW: Defining Elements: FIN240 Fixed Income - SECTION 90 Page 6 of 10 https://csus.instructure.com/courses/117655/quizzes/538403 ? headless=1 that the debt-to-equity ratio will not exceed 0.4 and times interest earned will not fall below 8.0. to insure and perform periodic maintenance on financed assets. that dividends will not exceed 60% of earnings. 1 / 1 pts Question 12 An example of a covenant that protects bondholders against the dilution of their claims is a restriction on: investments. debt. mergers and acquisitions. 1 / 1 pts Question 13 An example of a domestic bond is a bond issued by: LG Group from South Korea, denominated in British pounds, and sold in the United Kingdom.
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2/5/24, 3 : 53 PM HW: Defining Elements: FIN240 Fixed Income - SECTION 90 Page 7 of 10 https://csus.instructure.com/courses/117655/quizzes/538403 ? headless=1 Wal-Mart from the United States, denominated in US dollars, and sold in various countries in North America, Europe, the Middle East, and Asia Pacific. the UK Debt Management Office, denominated in British pounds, and sold in the United Kingdom. 1 / 1 pts Question 14 The structure that requires the largest repayment of principal at maturity is that of a: fully amortized bond. bullet bond. partially amortized bond. 1 / 1 pts Question 15 A plain vanilla bond has a maturity of 10 years, a par value of £100, and a coupon rate of 9%. Interest payments are made annually. The market interest rate is assumed to be constant at 9%. The bond is issued and redeemed at par. The principal repayment the first year is closest to:
2/5/24, 3 : 53 PM HW: Defining Elements: FIN240 Fixed Income - SECTION 90 Page 8 of 10 https://csus.instructure.com/courses/117655/quizzes/538403 ? headless=1 £6.58. £10.00. £0.00. 1 / 1 pts Question 16 Relative to a fully amortized bond, the coupon payments of an otherwise similar partially amortized bond are: equal. higher or equal. lower or equal. 1 / 1 pts Question 17 The bonds that do not offer protection to the investor against increases in market interest rates are: inverse floating-rate notes. floating-rate notes. step-up bonds.
2/5/24, 3 : 53 PM HW: Defining Elements: FIN240 Fixed Income - SECTION 90 Page 9 of 10 https://csus.instructure.com/courses/117655/quizzes/538403 ? headless=1 1 / 1 pts Question 18 The US Treasury offers Treasury Inflation-Protected Securities (TIPS). The principal of TIPS increases with inflation and decreases with deflation based on changes in the US Consumer Price Index. When TIPS mature, an investor is paid the original principal or inflation- adjusted principal, whichever is greater. TIPS pay interest twice a year based on a fixed real coupon rate that is applied to the inflation- adjusted principal. TIPS are most likely: indexed-annuity bonds. capital-indexed bonds. interest-indexed bonds. 1 / 1 pts Question 19 The type of bond with an embedded option that would most likely sell at a lower price than an otherwise similar bond without the embedded option is a: convertible bond. callable bond. putable bond.
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2/5/24, 3 : 53 PM HW: Defining Elements: FIN240 Fixed Income - SECTION 90 Page 10 of 10 https://csus.instructure.com/courses/117655/quizzes/538403 ? headless=1 1 / 1 pts Question 20 The put provision of a putable bond: limits the risk to the bondholder. does not materially affect the risk of either the issuer or the bondholder. limits the risk to the issuer. Quiz Score: 20 out of 20