CISI IAD - Securities || A+ Verified.
what is the minimum bid for UK t-bills? what are the increments?
when trading t-bills, what is the min nominal? correct answers GBP 500k minimum, GBP 50k
increments
When trading, minimum nominal value of GBP 25k
An underwriter guarantees to purchase any stock of company A that fails to be taken-up in an
IPO. At what price is the underwriter likely to make this purchase if called on to do so?
A
The underwriter will need to pay the issue price to ensure all shareholders are treated equally
B
Any surplus shares will be taken-up at a premium to the issue price to ensure the company raises
sufficient capital
C
The shares will be taken-up at a discount to the issue price, and implied in that discount is the
underwriter's fee
D
The price of the share on the market after issue will determine the price the underwriter will pay
correct answers C - The shares will be taken-up at a discount to the issue price, and implied in
that discount is the underwriter's fee
manufactured dividend? correct answers Payments passed back to the lenders of shares to
compensate them for any missed dividends issued by the company
bid-cover ratio - what is the limit? correct answers A ratio 2.0 and above usually indicates a
successful auction comprised of aggressive bids. A low ratio is an indication of a disappointing
auction, marked by a wide spread in the yield's bid.
dirty price of a bond = correct answers = clean price + period's coupons + days / days in period
The long-put option, like the short-call option are what type of strategies? correct answers
bearish
Long-call and short-put options are what type of stratgies? correct answers bull
what is the typical lifespan of a UK T-Bill? correct answers 91 days
what day are tenders for T-Bills usually issued? correct answers Friday
what is a rollover in FX? what is it also known as? correct answers buy and selling FX in the
same day to avoid physical delivery
tomorrow next - it is good becuase you artifically extend the settlement period
,what is the calculation for the forward rate? (FX, interest rate parity) correct answers Forward
Rate = (1+Rvariable curr) / (1+Rbase curr) * Spot
what is a reverse repo transaction? correct answers the purchase and resale of an asset at a pre-
agreed price
where is the largest FX capital market? correct answers LDN
what is the RPI? correct answers retail price index, comprising of 700 goods and services
calculated with an Arithmetic avg price
used in UK only, also for linkers and state pensions
what is RPIX? correct answers RPI minus mortgage payments
what is RPIY? correct answers RPI minus mortgage repayments and indirect tax (VAT)
what is CPI? correct answers harmonised index, calculated by a geometric avg excl. housing
costs
used by MPC - more broadly recognized
what is sub-ordinated loan stock? correct answers loan stock issued by a company that ranks
above its preference shares but below its unsecured creditors in the event of the company's
liquidation.
what is payment in kind notes? correct answers A form of mezzanine debt, these are zero coupon
bonds that are issued at a substantial discount to their face value. When they are repaid, the
difference between the redemption value and the purchase cost will provide the investor's return.
what is the ranking by investor for unsecured debt if a company is liquidated? (8 items) correct
answers 1. Liquidator
2. fixed charge holders
3. preferential creditors (e.g. employees)
4. floating charge holders
5. unsecured creditors / loan stock (e.g. trade creditors, gov)
6. subordinated loan stock
7. preference shareholders
8. ordinary shareholders
when do ADRs settle? correct answers T+2
what is a broke issue / broke syndicate bid? correct answers when a public offering trades below
its offering price
, in the event of a rights issue, what do ADRs get? and for a bonus issue? correct answers ADR
holders receive cash
Alters number of shares
what type of document is ADRs? correct answers bearer
What are redeemable shares? correct answers enable the company to buy back the shares from
the share holder at an agreed price in the future
What is a callable bond? correct answers a bond which the issuer has the right to redeem prior to
its maturity date
What is a putable bond? correct answers a bond which the holder has the right to redeem prior to
its maturity date
What is a convertible bond? correct answers a bond that can be converted to new ordinary shares
at the bondholder's discretion
what is an exchangeable bond? correct answers a bond that can be converted to existing ordinary
shares at the bondholder's discretion
what are - term spreads, default spreads, credit quality spreads and sovereign spreads? correct
answers term spreads - similar bonds of diff maturities
default spreads - IG grade corp. bonds and gilts (calculating default risk)
credit quality - IG and HY bonds (AAA vs CCC bonds)
sov spreads - diff types of gov debt
what is the criteria for competitive auctions for GILTS? correct answers - minimum bid price -
GBP 1 million nominal value
- price bid
- pay price bid
what is the criteria for non-competitive auctions for GILTS? correct answers - max bid - GBP
500k nominal value
- no price bid
- pay volume weighted avg price of successful competitive bids
what is interim funding / TAPS? correct answers DMO issues gilts into the secondary market via
GEMMS
what is the difference between auction and tender re: pricing? correct answers Auction - you pay
the price bid, competitive
(e.g. UK gilts, T-Bills)
Tender - you pay the lowest successful price
what is the minimum bid for UK t-bills? what are the increments?
when trading t-bills, what is the min nominal? correct answers GBP 500k minimum, GBP 50k
increments
When trading, minimum nominal value of GBP 25k
An underwriter guarantees to purchase any stock of company A that fails to be taken-up in an
IPO. At what price is the underwriter likely to make this purchase if called on to do so?
A
The underwriter will need to pay the issue price to ensure all shareholders are treated equally
B
Any surplus shares will be taken-up at a premium to the issue price to ensure the company raises
sufficient capital
C
The shares will be taken-up at a discount to the issue price, and implied in that discount is the
underwriter's fee
D
The price of the share on the market after issue will determine the price the underwriter will pay
correct answers C - The shares will be taken-up at a discount to the issue price, and implied in
that discount is the underwriter's fee
manufactured dividend? correct answers Payments passed back to the lenders of shares to
compensate them for any missed dividends issued by the company
bid-cover ratio - what is the limit? correct answers A ratio 2.0 and above usually indicates a
successful auction comprised of aggressive bids. A low ratio is an indication of a disappointing
auction, marked by a wide spread in the yield's bid.
dirty price of a bond = correct answers = clean price + period's coupons + days / days in period
The long-put option, like the short-call option are what type of strategies? correct answers
bearish
Long-call and short-put options are what type of stratgies? correct answers bull
what is the typical lifespan of a UK T-Bill? correct answers 91 days
what day are tenders for T-Bills usually issued? correct answers Friday
what is a rollover in FX? what is it also known as? correct answers buy and selling FX in the
same day to avoid physical delivery
tomorrow next - it is good becuase you artifically extend the settlement period
,what is the calculation for the forward rate? (FX, interest rate parity) correct answers Forward
Rate = (1+Rvariable curr) / (1+Rbase curr) * Spot
what is a reverse repo transaction? correct answers the purchase and resale of an asset at a pre-
agreed price
where is the largest FX capital market? correct answers LDN
what is the RPI? correct answers retail price index, comprising of 700 goods and services
calculated with an Arithmetic avg price
used in UK only, also for linkers and state pensions
what is RPIX? correct answers RPI minus mortgage payments
what is RPIY? correct answers RPI minus mortgage repayments and indirect tax (VAT)
what is CPI? correct answers harmonised index, calculated by a geometric avg excl. housing
costs
used by MPC - more broadly recognized
what is sub-ordinated loan stock? correct answers loan stock issued by a company that ranks
above its preference shares but below its unsecured creditors in the event of the company's
liquidation.
what is payment in kind notes? correct answers A form of mezzanine debt, these are zero coupon
bonds that are issued at a substantial discount to their face value. When they are repaid, the
difference between the redemption value and the purchase cost will provide the investor's return.
what is the ranking by investor for unsecured debt if a company is liquidated? (8 items) correct
answers 1. Liquidator
2. fixed charge holders
3. preferential creditors (e.g. employees)
4. floating charge holders
5. unsecured creditors / loan stock (e.g. trade creditors, gov)
6. subordinated loan stock
7. preference shareholders
8. ordinary shareholders
when do ADRs settle? correct answers T+2
what is a broke issue / broke syndicate bid? correct answers when a public offering trades below
its offering price
, in the event of a rights issue, what do ADRs get? and for a bonus issue? correct answers ADR
holders receive cash
Alters number of shares
what type of document is ADRs? correct answers bearer
What are redeemable shares? correct answers enable the company to buy back the shares from
the share holder at an agreed price in the future
What is a callable bond? correct answers a bond which the issuer has the right to redeem prior to
its maturity date
What is a putable bond? correct answers a bond which the holder has the right to redeem prior to
its maturity date
What is a convertible bond? correct answers a bond that can be converted to new ordinary shares
at the bondholder's discretion
what is an exchangeable bond? correct answers a bond that can be converted to existing ordinary
shares at the bondholder's discretion
what are - term spreads, default spreads, credit quality spreads and sovereign spreads? correct
answers term spreads - similar bonds of diff maturities
default spreads - IG grade corp. bonds and gilts (calculating default risk)
credit quality - IG and HY bonds (AAA vs CCC bonds)
sov spreads - diff types of gov debt
what is the criteria for competitive auctions for GILTS? correct answers - minimum bid price -
GBP 1 million nominal value
- price bid
- pay price bid
what is the criteria for non-competitive auctions for GILTS? correct answers - max bid - GBP
500k nominal value
- no price bid
- pay volume weighted avg price of successful competitive bids
what is interim funding / TAPS? correct answers DMO issues gilts into the secondary market via
GEMMS
what is the difference between auction and tender re: pricing? correct answers Auction - you pay
the price bid, competitive
(e.g. UK gilts, T-Bills)
Tender - you pay the lowest successful price
