Fixed Income MCQ - Fixed Income Section 1

26 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.

27 Which of the following is least likely to be an advantage of Eurobonds in comparison to domestic or foreign bonds?

The interest rate risk does not differ for Eurobonds, foreign bonds, or domestic bonds. Thus, this is not an advantage.

28 The price of a bond issued in Singapore by an American company and denominated in Singaporean dollars is most likely to:

The currency denomination of a bond’s cash flows influences which country’s interest rates affect a bond’s price. The price of a bond issued by an American company and denominated in Singaporean dollars will be affected by Singapore’s interest rates.

29 Analyst 1: A bond issued internationally, outside the jurisdiction of the country in whose currency the bond is denominated, is best described as a foreign bond.
Analyst 2: A bond issued internationally, outside the jurisdiction of the country in whose currency the bond is denominated, is best described as a Euro bond. Which analyst’s statement is most likely correct?

Eurobonds are issued internationally, outside the jurisdiction of any single country. Foreign bonds are issued in a specific country, in the currency of that country, by an issuer domiciled in another country.

30 Libor rates reflect rates at which a select set of banks believe they could borrow unsecured funds from other banks in the London interbank market for different currencies and different borrowing periods ranging from:

The borrowing periods corresponding to LIBOR range from overnight to one year.