Fixed Income - Quiz 3

11 questions

1. 1. The quoted price of a corporate bond is 90 1/4. The par value is $5,000. The dollar price is closest to:
   $4,500$4,512$4,525
2. 2. The following statements about bond markets are true EXCEPT:
   Municipal securities are generally issued by state and local governments.The interest and principal in revenue bonds is secured by the full faith and credit of the issuer usually supported by issuers’ unlimited or limited taxing power.US Agency bonds are not necessarily guaranteed by the government.
3. 3. In a pass-through MBS, which of the following collateral cash flows is an investor likely to receive?
   Interest onlyPrincipal onlyBoth interest and principal
4. 4. Which of the following statements regarding the motivations for issuing CDOs is FALSE?
   CDOs enable banks to shift assets off balance sheet. Banks cannot reduce over-concentration to a particular obligor through a CDO issue.CDOs enable banks to diversify their sources of funding.
5. 5. In an arbitrage CDO, from where does the arbitrage opportunity arises?
   A mispricing between the individual CDO tranchesMarket imperfections causing the spread between investment and non-investment grade debt to widen too muchCash and carry arbitrage
6. 6. What is the maximum maturity of US domestic commercial paper?
   180 days270 days365 days
7. 7. Which of the following is a characteristic of commercial paper?
   Most CP issues have medium- to long-term maturities.Commercial paper is generally unsecured.CP is not negotiable.
8. 8. A receipt issued by a bank to a depositor to acknowledge money deposited. The bank guarantees to repay the principal plus interest at maturity.

   The above definition refers to which of the following?

   Commercial paperCertificate of depositFixed deposit
9. 9. Which of the following money market instruments is NOT a discount instrument?
   Commercial paperBankers' acceptanceCertificates of deposit
10. 10. Which of the following statements about corporate bonds is TRUE?
    Debentures are unsecured bonds.Debenture bondholders have no claim on the assets of the issuer.Debentures are those bonds that do not have any provisions to protect bondholders.
11. 11. An investor holds $100,000 worth of Treasury Inflation Protected Securities (TIPS). The securities pay a coupon of 5% paid semi-annually. If the annual inflation rate is 3%, calculate the first coupon payment that the investor will receive after 6 months.
    25002537.52575