Fixed Income CFA Prep Exam With
Verified Complete Solutions.
LIBOR rates are determined:
A)by countries' central banks.
B)by money market regulators.
C)in the interbank lending market. - Answer C)in the interbank lending market.
In which type of primary market transaction does an investment bank sell bonds on a commission basis?
A)Single-price auction.
B)Best-efforts offering.
C)Underwritten offering. - Answer B)Best-efforts offering.
Secondary market bond transactions most likely take place:
A)in dealer markets.
B)in brokered markets.
C)on organized exchanges. - Answer A)in dealer markets.
Sovereign bonds are described as on-the-run when they:
A)are the most recent issue in a specific maturity.
B)have increased substantially in price since they were issued.
C)receive greater-than-expected demand from auction bidders. - Answer A)are the most recent issue in
a specific maturity.
Bonds issued by the World Bank would most likely be:
, A)quasi-government bonds.
B)global bonds.
C)supranational bonds. - Answer C)supranational bonds.
With which of the following features of a corporate bond issue does an investor most likely face the risk
of redemption prior to maturity?
A)Serial bonds.
B)Sinking fund.
C)Term maturity structure. - Answer B)Sinking fund.
With a sinking fund, the issuer must redeem part of the issue prior to maturity, but the specific bonds to
be redeemed are not known. Serial bonds are issued with a schedule of maturities and each bond has a
known maturity date. In an issue with a term maturity structure, all the bonds are scheduled to mature
on the same date.
A financial instrument is structured such that cash flows to the security holder increase if a specified
reference rate increases. This structured financial instrument is best described as:
A)a participation instrument.
B)a capital protected instrument.
C)a yield enhancement instrument. - Answer A)a participation instrument.
Floating-rate notes are an example of a participation instrument.
Smith Bank lends Johnson Bank excess reserves on deposit with the central bank for a period of three
months. Is this transaction said to occur in the interbank market?
A)Yes.
B)No, because the interbank market refers to loans for more than one year.
Verified Complete Solutions.
LIBOR rates are determined:
A)by countries' central banks.
B)by money market regulators.
C)in the interbank lending market. - Answer C)in the interbank lending market.
In which type of primary market transaction does an investment bank sell bonds on a commission basis?
A)Single-price auction.
B)Best-efforts offering.
C)Underwritten offering. - Answer B)Best-efforts offering.
Secondary market bond transactions most likely take place:
A)in dealer markets.
B)in brokered markets.
C)on organized exchanges. - Answer A)in dealer markets.
Sovereign bonds are described as on-the-run when they:
A)are the most recent issue in a specific maturity.
B)have increased substantially in price since they were issued.
C)receive greater-than-expected demand from auction bidders. - Answer A)are the most recent issue in
a specific maturity.
Bonds issued by the World Bank would most likely be:
, A)quasi-government bonds.
B)global bonds.
C)supranational bonds. - Answer C)supranational bonds.
With which of the following features of a corporate bond issue does an investor most likely face the risk
of redemption prior to maturity?
A)Serial bonds.
B)Sinking fund.
C)Term maturity structure. - Answer B)Sinking fund.
With a sinking fund, the issuer must redeem part of the issue prior to maturity, but the specific bonds to
be redeemed are not known. Serial bonds are issued with a schedule of maturities and each bond has a
known maturity date. In an issue with a term maturity structure, all the bonds are scheduled to mature
on the same date.
A financial instrument is structured such that cash flows to the security holder increase if a specified
reference rate increases. This structured financial instrument is best described as:
A)a participation instrument.
B)a capital protected instrument.
C)a yield enhancement instrument. - Answer A)a participation instrument.
Floating-rate notes are an example of a participation instrument.
Smith Bank lends Johnson Bank excess reserves on deposit with the central bank for a period of three
months. Is this transaction said to occur in the interbank market?
A)Yes.
B)No, because the interbank market refers to loans for more than one year.
