Bond Issuance and Classification: Key Concepts and Examples

Classified in Mathematics

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Which of the following is most likely an issuer bonds: HEDGE FUND

A bond issued by a city would most likely be classified as a: NON-SOVEREIGN GOVERNMENT BOND

A fixed-income security issued with a maturity at issuance of nine months is most likely classified: MMSECURITY

The price of a bond issued in the US by a British company and denominated in US dollars is most likely: CHANGE AS US INTEREST RATES CHANGE

Interbank offered rates are best described as the rates at which major banks can: BORROW UNSECURED FUNDS

A company issues floating-rates bonds. The coupon rates is expressed as the three-month Libor plus a spread. The coupon payments are most likely: LIBOR INCREASES

A 10-year bond was issued four years ago. The bond is denominated in US dollars, offers a coupon rate of 10% with interest paid semi-annually, and is currently priced at 102% of par. The bond's: NOMINAL RATE IS 5%

A sovereign bond has a maturity of 15 years. The bond is best described as a: CAPITAL MARKET SECURITY

A company has issued a floating-rate note with a coupon rate equal to the three-month Libor + 65 basis points. Interest payments are made quarterly on 31 March, 30 June, 30 September, and 31 December. On 31 March and 30 June, the three-month Libor is 1.55% and 1.35%, respectively. The coupon rate for the interest payment made on 30 June is: 1.55+0.65=2.20

A 10-year, capital-indexed bond linked to the Consumer Price Index (CPI) is issued with a coupon rate of 6% and a par value of 1,000. The bond pays interest semi-annually. During the first six months after the bond's issuance, the CPI increases by 2%. On the first coupon payment date, the bond's: PRINCIPAL AMOUNT NCRE 1.020

Bond A is priced at a premium, so its YTM is below its 5% coupon rate. Bond B is priced at par value so its YTM is equal to its 6% coupon rate. Bond C is priced at a discount below par value, so its YTM is above its 5% coupon rate.

Which bond will most likely experience the smallest percent change in price if the market discount rates for all three bonds increase by 100 basis points? BOND B

Relative to Bond C, for a 200 basis point decrease in the required rate of return, Bond B will most likely exhibit a(n): GREATER PERCENT PRICE CHANGE

An investor purchases a nine-year, 7% annual coupon payment bond at a price equal to par value. After the bond is purchased and before the first coupon is received, interest rates increase to 8%. The investor sells the bond after five years. Assume that interest rates remain unchanged at 8% over the five-year holding period. Per 100 of par value, the future value of the reinvested coupon payments at the end of the holding period is closest to: 41.07

The capital gain/loss per 100 of par value resulting from the sale of the bond at the end of the five-year holding period is closest to a: LOSS 3.31

Assuming that all coupons are reinvested over the holding period, the investor's five-year horizon yield is closest to: 6.62

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