Fixed Income Review Test and Quizzes (Answered) Verified Solution

Fixed Income Review Test and Quizzes (Answered) Verified Solution The US debt market is larger than the US equity market? (T/F) TRUE All of the following are differentiating factors of fixed income securities versus equity securities except for: -Fixed claim -Infinite Life -Tax deductibility by user -Higher priority on cash flows Infinite Life A bond's CUSIP is defined as: A) A unique nine digit number to identify individual bonds B) A number assigned by the SEC to all registered bond offerings Only A is correct All of the following are differences in how bond trade versus equities except: -Equities generally trade at a wider spread differential -Bonds trade in a more opaque market (less pricing data readily available) -Equities tend to more often be traded on electronic exchanges -Minimum trading sizes for equities are smaller Equities generally trade at a wider spread differential In terms of returns, bond investors who buy and intend to hold a bond to maturity are primarily focused: A)Price appreciation B)Principal return and income yield Only B is correct All of the following are examples of Fixed Income asset classes except: -Convertibles -Interest Rate Options -RMBS -High Yield Interest Rate Options A bond's indenture: -Contains its covenants -relates only to its interest and principal payments -is the same as a debenture Contains its covenants Which of the following bond covenants is most accurately described as an affirmative covenant? The bond issuer must not: -issue more debt with the same or higher seniority -violate laws or regulations -sell assets pledged as collateral violate laws or regulations A pure-discount bond: -always sells at par -pays interest on a regular basis (typically semi-annually) -does not pay interest on a regular basis does not pay interest on a regular basis Which of the following statements is most accurate with regard to floating-rate issues that have caps and floors? -A floor is an advantage to the bondholder, while a cap is an advantage to the issuer -A cap is an advantage to the bondholder, while a floor is an advantage to the issuer -A floor is an advantage to both the issuer and the bondholder, while a cap is a disadvantage to both the issuer and the bondholder A floor is an advantage to the bondholder, while a cap is an advantage to the issuer For a fixed income new issuance, a prospectus typically contains this piece of information not found in the indenture -Maturity date -Coupon rate -Call price -Overview of issuer's business Overview of issuer's business Another term for a bond's maturity is -par value -duration -tenor tenor All of the following are examples of types of issuers of fixed securities except: -Government -Corporate -CUSIP -SPV/SPE CUSIP All of the following terms are synonymous with non-investment grade debt accept: -Junk bonds -High yield -BBB Bonds BBB Bonds Which item below ranks investment grade ratings from the highest credit quality first to the lowest credit quality last. -BB+,BB,A,AA,AAA -AAA,AA,A,BBB -BBB,BB+,A,AA,AAA -AAA,AA,A,BBB,BB+ AAA, AA, A, BBB