Fixed Income MCQ - Fixed Income Section 1

21 The interest rate of a security is adjusted periodically as per inflation. This is most likely a(n):

Any bond that is aligned with an index or inflation is called index-linked bonds.

22 Inflation-linked bonds are structured in a way that:

Inflation-linked bonds can be structured in a variety of ways; the inflation adjustment can be made via the coupon payments, the principal repayment, or both.

23 Which of the following is least likely an issuer of bonds?

Pension funds are typically investors in, not issuers of, bonds. A and C are incorrect because major issuers of bonds include sovereign (national) governments, non-sovereign (local) governments, quasi-government agencies, supranational organizations, and financial and non-financial companies.

24 Analyst 1: Non-sovereign government bonds are bonds issued by agencies that are owned by governments.
Analyst 2: Non-sovereign government bonds are bonds issued by an international organization such as World Bank. Which analyst’s statement is most likely correct?

Non-sovereign (local) government bond issuers include provinces, regions, states, and cities. Analyst 1 is incorrect because quasi-government bonds are issued by agencies that are either owned or sponsored by governments. Analyst 2 is incorrect because supranational bonds are issued by international organizations.

25 A fixed-income security issued with a maturity at issuance of five months is most likely classified as a:

Money market securities are issued with a maturity at issuance (original maturity) ranging from overnight to one year. A is incorrect because securitization does not relate to a bond’s maturity, but to the process that transforms private transactions between borrowers and lenders into securities traded in public markets. C is incorrect because capital market securities are issued with an original maturity longer than one year.