Asset Classes - Debt types & features Flashcards
What is a method of raising mezzanine debt?
Issuing payment in kind notes
Index-linked gilts
Both the coupon and the redemption value are index-linked
When creating an asset-backed security, to keep the instrument off-balance sheet, which of the following is used?
SPV
What is the order of priority in a winding-up?
Debentures. Guaranteed bond. Subordinated loan stock. Ordinary shares.
Which pay interest semi-annually?
US Tbonds
JGBs
Who are municipal bonds best suited for?
US investors living in the issuing state
Credit enhancements are
tools used by an issuer to enable bonds to be more highly-rated.
Which of the following is the most common form of security for debentures?
Fixed charge over property.
Which of the following asset classes can be broken into tranches offering different levels of risk and return?
Mortgage-backed securities
Collateralised debt obligations.
What does the term mezzanine capital refer to?
Unsecured high-yield debt that represents a claim on a company’s assets.
When a government bond is stripped
the income streams are treated as separate securities
In relation to the international government bond market
Bobls are German bonds paying annual coupons
Which of the following corporate debt securities is secured against a particular asset of a company?
Fixed charge
Which of the following is least likely about bonds
Prices are typically quoted dirty
Inters rates on index-linked gilts are linked to
Retail price index
If the credit rating on a corporate bond is upgraded
coupon will remain the same and the prices will rise
Bonds issued by US Treasury
coupons are paid semi-annually
Asian Development Bank
would issues supranational bonds
CCC
represents the credit rating of a non-investment grand bond
The different yields between conventional and index-linked gilts may be viewed as reflecting
long-term inflation rates
Schatz
life of less than 5 years when issued
Patrick observes that the effective price per share from a convertible bond is lower than the current market price of the underlying shares. how can he profit from this observation?
Buy the convertible and sell the underlying shares.
Zero-dividend preference shares
are paid out first on a liquidation
Stripped government bonds
Zero coupon
Tradable
Payment in kind notes are issued with
Mezzanine debt
CREST
is not permitted to strip a gilt
German bunds settle
T+2
Bearer document
sterling ond issued in the US, China and throughout the Eurozone
A company could issue bonds in order to satisfy the needs of investors that wish to invest in it, with the coupon rate and maturity set according to market demand. This is an example of
Medium term notes
Bobls
Issued by the German government
Maturity of 5 years.
Where a bond issuer has set aside a certain amount each year to buy back a certain number of bonds which are deemed callable they would have set up a
Sinking fund
French bonds settle
T+2
US T Bonds settle
T+1
JGB settle
T+1
Medium-term notes generally have a life to maturity of
2-10 years.
A guaranteed bond of a company is generally guaranteed by
a company in the same group
Convertible bond
similar to purchasing a non-convertible bond and being long an American style stock option
Convertible bond
may be in a different currency to the converted shares
Convertible bond
acts an option to purchase shares in the issuing company at the discretion of the buyer
JGB
paid semi annually
JGB
repayable on specific date
common maturity of 10 years
either register or bearer
French OAT
pays annual coupon
Bobls have a life of
3-5 years
German government bonds
Bund and Bobl
10 year strippable government bond can be stripped into
21 individual strips
Freddie Mac
Federal home loan mortgage corporation
Effect on price of convertible loan stock if share prices fall
Price of convertible falls
US local government bonds are also known as
municipal bonds
Repo rate
derived from gilt sale and repurchase
US Bonds
Registed
Not issued with a zero-couon
Bobl
German govt bond with maturity of 3 and 5 years.
BBB-
lowest S&P rating for investment grade debt
Index linked government bonds
Pay a low coupon
Coupon varies with inflation
Range of maturities are available
Eurobonds
Fixed coupon
Bearer form
Vanilla convertible bond usually pays
fixed coupon
Immobilisation
placement of bearer securities with a centralised depository
JGB issued with a maturity of
10 years
Mezanine debt
carries a greater degree of risk than subordinated debt
A bond which has just defaulted on a coupon payment would be rated by S&P as
D
During a period of zero inflation what is the impact on the coupon of an index-linked gilt?
The coupon will be unadjusted in that period
In relation to seniority where would mezzanine debt be placed?
Above preference shares and below subordinated debt
Why would a company prefer to issue a convertible bond rather than issue shares to finance a takeover?
To benefit from lower initial servicing costs
Which of the following is not an issuer of mortgage-backed securities in the US?
Government Home Mortgage Corporation
Holders of subordinated debt rank above which of the following instruments?
Preference shares
According to the credit ratings agency Moody’s what credit rating would be issued to a bond in default?
C
Which of the following best describes a mortgage-backed security?
Bonds created when a group pf mortgage loans are pooled together to be sold to investors.
TRAX
system for reporting eurobond trades
Clean price of a gilt means
excluding accrued interests
What would a bond spread normally be described as?
Difference between the bond’s yield and the yield on a benchmark gilt
The life of an OAT is typically
2-50 years
JGB settle
T+1
Which of the following might describe the difference between government expenditure and revenue?
The deficit
