Bond Business

Question 1

Short selling restriction is applied to selling in margin transaction however if the volume of sales per transaction accepted is less than 50 times the trading unit and is conducted by individual investors such case is exempt from so-called price restriction of short selling restriction

Answer 1

Correct

Question 2

The dumbbell type portfolio is a portfolio that holds bonds from short-term to long-term in equal weights for every single year maintaining the same composition of maturities each year

Answer 2

The dumbbell type portfolio holds only short terms bonds to ensure liquidity and long term bonds for profitability

Question 3

During the period when benchmark futures contracts are replaced, there is a tendency to cover short hedges on nearest futures contracts and newly hedge with other futures contracts, and accordingly, with nearest futures contracts, the basis can shrink rapidly whereas with other futures contracts the vais widens rapidly

Answer 3

Correct

Question 4

When a bond is issued under par, the bond holder will realize a loss when the bonds are redeemed at maturity

Answer 4

Wrong

The bond holder will accrue a gain upon maturity

Question 5

Gensaki transaction is a type of arbitrage transaction that focuses on the spread between spot prices and future prices

Answer 5

Wrong

Bond transactions where the parties agree at the time of trading to execute offsetting trades of the same type and volume of bonds at a predetermined date and price

Question 6

Commercial papers are transferable certificates of deposit issues by a financial institutions

Answer 6

Wrong

Commercial paper is an unsecured, short term security issued by a blue chip company to meet its operating capital requirements

Question 7

Bond borrowing and lending transactions can be divided into

• uncollateralized bond borrowing and lending transactions
• bond borrowing and lending transactions collateralized by margin transactions
• cash collateral bond borrowing and lending transactions

Answer 7

True

Question 8

Easy-money policy is regarded as a negative factor in the bond market in general

Answer 8

False

Question 9

Special deficit financing government bonds

Answer 9

Bonds which are issued in order to obtain funds to use in expenditures other than public projects etc where a revenue shortfall is expected despite the tax revenues, non tax revenues etc as well as funds raised by the construction bonds

Question 10

Coupon rate in inflation indexed bonds

Answer 10

Set at the time of issuance and remains constant for all interest payments.
The P amount of the bond varies with trends in the consumer price index

Question 11

Days elapsed needed when calculating accrued interest for transactions in listed interest bearing bonds

Answer 11

Number of days elapsed refers to the number of days from the following day of the previous interest payment date to the delivery date (included).

Question 12

Current yield

Answer 12

Currently yield =

coupon rate ➗purchase price x100

Question 13

Subscriber yield

Answer 13

Subscriber yield

                          Redemption price Issue price 
Coupon rate + —————————————— =                           Number of years to maturity
———————————————————— x 100
                         Issue price

Question 14

When the yields goes up the bond price goes down therefore increasing yiekd mean a downturn on in the market

Answer 14

True