Chapter 12 Flashcards
In any given year, about what percent of outstanding bonds are likely to be international rather than domestic bonds?
30%
B. One denominated in a particular currency but sold to investors in national capital markets other than the country that issued the denominating currency.
C. for example, a German MNC issuing dollar-denominated bonds to U.S. investors
Foreign Bond
The four currencies in which the majority of domestic and international bonds are
denominated are
D. U.S. dollar, the euro, the pound sterling, and the yen.
C. possession is evidence of ownership.
bearer bond
shows the owner’s name on the bond.
B. the owner’s name is recorded by the issuer.
C. the owner’s name is assigned to a bond serial number recorded by the issuer.
register bond
Eurobonds are usually
bearer bonds
Because __________ do not have to meet national security regulations, name recognition
of the issuer is an extremely important factor in being able to source funds in the international capital market.
Eurobond
allows an issuer to preregister a securities issue, and then “shelve” the securities for later
sale.
Self Registration
is a very large international bond offering by a single borrower that is simultaneously sold in several national bond markets
Global Bound
The vast majority of new international bond offerings
A. are straight fixed-rate notes.
- In contrast to many domestic bonds, which make _________ coupon payments, coupon interest on Eurobonds is typically paid _________
A. semiannual, annually
Bonds that a designated maturity date at which the principal of the bond issue is promised to be repaid. During the life of the bond, fixed coupon payments, which are a percentage of the face value, are paid as interest to the bondholders.
Straight Fixed- rate bond
are typically fixed-rate corporate notes issued with maturities ranging from less than a year to about ten years
Euro-medium term notes
- There are two types of equity related bonds
C. convertible bonds and bonds with equity warrants.
B. can be viewed as straight debt with a call option (technically a warrant) attached.
Bonds with equity warranta
B. are typically medium-term bonds with coupon payments indexed to some reference rate (e.g. LIBOR).
C. appeal to investors with strong need to preserve the principal value of the investment
should they need to liquidate prior to the maturity of the bonds.
Floating Rate Notes
are a form of adjustable rate bond.
Floating Rate NOtes
A five-year floating-rate note has coupons referenced to six-month dollar LIBOR, and
pays coupon interest semiannually. Assume that the current six-month LIBOR is 6 percent. If the risk premium above LIBOR that the issuer must pay is 1/8 percent, the next period’s coupon rate on a $1,000 face value FRN will be:
C. $30.625
A ten-year Floating-rate note (FRN) has coupons referenced to 3-month pound LIBOR, and pays coupon interest quarterly. Assume that the current 3-month LIBOR is 3 percent. If the risk premium above LIBOR that the issuer must pay is 1/8 percent, the next period’s coupon rate on a £1,000 face value FRN will be
D. £7.8125
The floor value of a convertible bond
A. is the “straight bond” value.
B. is the conversion value.
C. is the minimum of a) and b).
D. is the maximum of a) and b).
Find the price of a 30-year zero coupon bond with a €1,000 par value that has a yield to maturity of i€ = 5 percent
A. €231.38
Zero-coupon bonds issued in 2006 are due in 2016. If they were originally sold at 55
percent of face value, the implied yield to maturity at issuance is
B. 6.16%.
A. pay interest at zero percent.
B. are sold at a discount from par value.
Zero Coupon Bond
A. have no interest income.
C. gave only capital gains income
Zero Coupn Bond
issue allows the investor to exchange the bond for a predetermined number of equity shares of the issuer.
Convertible bond
is usually never higher than the rating assigned to the sovereign government of the country in which it resides.
The credit rating of an international borrower
a group of investment banks, merchant banks, and the merchant banking arms of
commercial banks that specialize in some phase of a public issuance.
The underwriting syndicate of a bond
Underwriters for a domestic bond issue will commit their own capital to buy the issue
from the borrower at a discount from the issue price. The discount, or underwriting spread, is typically
A. in the 1 to 1.5 percent
Underwriters for an international bond issue will commit their own capital to buy the issue from the borrower at a discount from the issue price. The discount, or underwriting spread, is
typically
B. in the 2 to 2.5 percent range.
B. in the 2 to 2.5 percent range.
The secondary market for Eurobonds
Eurobond market makers and dealers are members of the ______________, a selfregulatory body based in Zurich.
D. International Capital Market Association (ICMA)
A. stand ready to buy or sell for their own account.
B. quote bid and ask spreads.
C. trade directly with one another, through a broker or with retail customers.
Market makers in the secondary bond market
Two major clearing systems for international bond transactions are
A. Euroclear and Clearstream International.
. Euroclear and Clearstream International.
A bond market index
The J.P. Morgan and Company Global Government Bond Index is __________
representation of the individual country government bond indexes.
A. a value weighted
