Fixed Income - Fixed Income Section 1
- A
Non-sovereign bonds are issued by agencies that are owned or sponsored by governments. Quasi-government bonds are issued by local government authorities.
- B
Non-sovereign bonds are issued by companies. Quasi-government bonds are issued by supranational organizations.
- C
Non-sovereign bonds are issued by local government authorities. Quasigovernment bonds are issued by agencies that are owned or sponsored by governments.
- Option : C
- Explanation : Bonds issued by local government authorities are called non-sovereign bonds. Bonds issued by agencies that are owned or sponsored by governments are called quasi-government bonds. Additionally, bonds issued by supranational organizations are called supranational bonds. Bonds issued by national governments are called sovereign bonds. Bonds issued by companies are called corporate bonds.
- Option : B
- Explanation : A bond with an original maturity of more than one year it is called capital market security. A bond with an original maturity of one year or less is called money market security.
- Option : C
- Explanation : Statements II and III are correct. Statement I is incorrect because floating rate notes are less affected when interest rate changes and therefore have less interest rate risk.
- Option : C
- Explanation : A bond quoted at 102 reflects a premium of 2% over its par value. This results in current market price of $10,200. Since the market price is greater than the par value, the bond is trading at a premium.
- Option : C
- Explanation : Coupon rate of 5% paid quarterly means 5/4 = 1.25% of par is paid every quarter. On a face value of $1,000, this results in a periodic interest payment of $12.5. This amount is paid every quarter i.e. four times a year.
*/?>
*/?>
*/?>
*/?>