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1.The first thing that the bank consider prior calling a bond issued
a. lower interest in the market
b. the higher interest rate on the market
c. lower inflation rate
2. most typical form of short-term, zero-coupon debt issued by the Treasury.
a. treasury bonds
b. treasury bills
c. structured notes
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- 1. Types of bonds Fixed-income securities consist of debt instruments and preferred stock. Bonds are debt securities in which a borrower promises to pay a specified interest rate and principal at a future date. A. Which of the following statements about Treasury bonds is the most accurate? Treasury bonds have a very small amount of default risk, so they are not completely riskless. Treasury bonds are completely riskless. Treasury bonds are not completely riskless, since their prices will decline when interest rates rise. B. Based on the information given in the following statement, answer the questions that follow: In July 2009, Hungary successfully issued 1 billion euros in bonds. The transaction was managed by Citigroup. Who is the issuer of the bonds? The Hungarian government Hungary Bank Citigroup C. What type of bonds are these? Municipal bonds Corporate bonds Government bonds1. Statement I - Before a bond is issued, the issuer must have to consider or study the current market interest rate to arrive at a quoted interest rate. Statement II - At the final issue of bonds, the quoted Interest rate will become fixed and is termed as coupon rate. -Only statement II is correct -Both statements are incorrect -Only statement I is correct -Both statements are correct 2. The liquidity function of the financial market provides for an opportunity for the investors to sell their financial instruments at its prevailing fair value. Is it true or false? 3. Which of the following is not a role of a financial manager? -Supervises employees who do accounting and budgeting reports department. -Makes sure that legal requirements affecting financial aspects are met. -Makes financial decision -Prepares financial reports 4. Which of the following statements is incorrect? -Liquidity premium is required by investors to compensate them in case there is a decrease in the purchasing…1. Statement I - Before a bond is issued, the issuer must have to consider or study the current market interest rate to arrive at a quoted interest rate. Statement II - At the final issue of bonds, the quoted Interest rate will become fixed and is termed as coupon rate. -Only statement II is correct -Both statements are incorrect -Only statement I is correct -Both statements are correct 2. The liquidity function of the financial market provides for an opportunity for the investors to sell their financial instruments at its prevailing fair value. Is it true or false? 3. Which of the following is not a role of a financial manager? -Supervises employees who do accounting and budgeting reports department. -Makes sure that legal requirements affecting financial aspects are met. -Makes financial decision -Prepares financial reports 4. Which of the following statements is incorrect? -Liquidity premium is required by investors to compensate them in case there is a decrease in the purchasing…
- From page 9-2 of the VLN, what is the first thing you want to identify when approaching a bond problem? Group of answer choices A. Annual bond or semiannual bond B. Whether the market rate is different from the stated rate. C. The cash flows provided by the bond. D. The company's debt to equity ratio.Which of the following statements is right? Group of answer choices a)Ignoring the liquidity risk, the 10-treasry bond should have the same interest rate as the 10-year corporate bond. b)Ignoring the default risk, the 10-treasry bond should have the same interest rate as the 10-year corporate bond. c)The return of the 10-year treasury bond must be less than that of the 10-year corporate bond d)The return of the 10-year treasury bond must be greater than that of the 10-year corporate bondWhich of the following statements is not correct? a) The export value of the bond; the value the investor pays when buying bonds b) Nominal value of the bond; is the value written on the bond c) Another reason for the difference in bond market prices is the dividend paid to bonds. d) Periodic interest amounts on bonds are calculated at nominal value. e) Market value of a bond is equal to the present value of the interest to be paid by the bond and the principal amount to be paid at the end of maturity. ------------------ What is the market value of İdil Gıda's bond with a nominal value of 15000 USD, maturity of 3 years and 30% annual interest payment, assuming that the desired yield rate is 36%? a) 12500b) 13494c) 9000d) 5456e) 7594 ============ What is the market value of Beril Gıda A.Ş.'s bond with a nominal value of USD 12,000, maturity of 5 years and an annual interest payment of 25%, when the desired rate of return is 25%? a) 18000b) 15000c) 12000d) 16000e)…
- (I) Because interest rates on Treasury bills are more volatile than rates on long-term securities, the return on short-term Treasury securities is usually above that on longer-term Treasury securities. (II) A Treasury STRIP separates the periodic interest payments from the final principal repayment. A. (I) is true, (II) false. B. (I) is false, (II) true. C. Both are true. D. Both are false.1. Under what conditions would the yield-to-maturity and current yield of a bond be equal? Group of answer choices a. The bond is priced at par b. The bond is priced at a discount c. Insufficient information d. The bond is priced at a premium 2. Which of the following is correct about the risk-free rate as used in valuing equity instruments? Group of answer choices a. The risk-free rate accounts for the rate of return or yield of a government instrument which does not carry any risk. b. The risk-free rate used for valuing equity instruments is normally the yield of a long-term government security. c. The risk-free rate used for valuing equity instruments is the same as that used for valuing short-term debt instruments. d. The risk-free rate accounts for the risks related to government securities which is composed of credit-spread, maturity risk premium and the real risk-free rate. 3. Berg Inc. has just paid a dividend of P2.00. Its stock is now selling…1. If a bond has a credit rating of A, which of the following is not true: A) The bond has more risk than a government bond B) The bond is considered a junk bond C) The bond is less risky than a BBB bond D) The bond is currently making all of its debt payments 2. Assume you have a CDO which had an equity trache that is 5% of all assets and a Mezzanine tranche that is 20% of all assets and a Senior tranche that is 75% of all assets. If the firm assets lose 10% of their total value, what does this mean for the Mezzanine tranche? A) They will not be affected B) They will lose 25% of their investment C) They will lose 50% of their investment D) They will lose 100% of their investmenT
- The time value of money is used in calculating bond prices because: Group of answer choices A - The company might choose to repay the bonds prior to their maturity date B - Bond investors receive future payments and purchase bonds with current dollars C - The amount to be repaid at maturity will change as market rates change D - Cash interest payments to bondholders will change as market rates changeHow does the credit spread change with the bond rating? Why? Security Yield Treasury 3.120AAA corporate 3.874BBB corporate 4.521B corporate 5.328You are given the following prices and cash flows associated with bonds. CF stands for cash flow. Bond Price Today CF Year 1 CF Year 2 CF Year 3 A 105.185 10 10 110 B 90.371 100 0 0 C 91.784 5 105 0 D X 15 15 115 What is the current price of Bond D as per the no-arbitrage principle? In other words, what is the value of X?