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CFMP > Exam #2 > Flashcards

Exam #2 Flashcards

1
Q

Also called bonds

Any debt instrument w/ future cash flows that are contractually defined and can be predetermined

A

Fixed income securities

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2
Q

Basic features of a bond

A

Tenor
Issuer
Par Value
Coupon Rate and Frequency
Currency denomination

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3
Q

YTM < coupon rate

A

Premium

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4
Q

YTM>Coupon rate

A

Discount

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5
Q

Make coupon payments in one currency and pay the face value at maturity in another currency

A

Dual-currency bonds

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6
Q

Entitles the bond holders the preference in which they want to receive interest payments and principal repayments

A

Currency option bonds

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7
Q

Celebrities can issue a bond

A
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8
Q

Fixed rate bonds features

A

All-in yield

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9
Q

Formula for credit spread

A

Credit spread = sum of risk premium + default risk-free

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10
Q

Margin or benchmark over default risk-free rate to compensate investor on the firm-specific credit risk on underlying security

A

Credit spread

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11
Q

Yield from govt securities (GS) bond used as reference for corp bond

A

Default risk-free rate

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12
Q

Formula: default risk free rate

A

Real risk free + inflation rate

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13
Q

Internet rate

A

Default risk free rate + credit spread

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14
Q

ROP are dollar-dominated bonds

A
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15
Q

FXTN

A

Fixed rate Treasury notes

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16
Q

RTB

A

Retail Treasury bonds

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17
Q

ROP

A

Republic of the Philippines bonds

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18
Q
  1. Foreign Securities Market
  2. Currency Market
  3. Equity Market
  4. Real Estate Market
  5. Capital Market
  6. Money Market
  7. Cash/Spot Market
A
  1. Very high
  2. High
  3. Medium to High
  4. Medium
  5. Low to Medium
  6. Low
  7. Very Low
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19
Q

Where funds are generated and traded

A

Financial markets

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20
Q

Funds and securities are exchanged between

A

Issuers and investors

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21
Q

Examples of fixed income security

A

Govt bonds
Index-linked bonds
High yield debt

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22
Q

All-in bond yield

A

Credit spread + default risk free

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23
Q

What type of fixed income instrument offers only a return to a default risk free rate

A

Government securities yields

24
Q

Considered default “risk free” interest rates due to a National Government ability to

A
  1. Print money
  2. Collect taxes to pay off its debt
25
Q

Difference between corporate security yield and GS yield is the

A

Credit spread

26
Q

Attributes of a benchmark

A

Credible
Verifiable
Transparent

27
Q

Primary risks /risk considerations

A

Credit
Market
Liquidity
Operations

28
Q

Measure of income that is comparable to the dividend yield for a common share

A

Currency yield or running yield

29
Q

Formula for current yield

A

Annual cash coupon payment/bond price

30
Q

Provides an estimate of the bond’s expected return or rate of return

Reflects the per annum return

A

YTM/market discount rate

31
Q

Any given amount is worth more sooner than later

32
Q

Discount factor

A

= 1/(1+rt)

33
Q

interest rate

A

= fv/pv-1 x 1/t

34
Q

PV and FV depends on

A

Interest rate
Tenor

35
Q

Bond prices and interest rates move in opposite directions

36
Q

The lower the seniority ranking of a bond, the higher its credit risks

37
Q

Backed by a collateral

A

Secure debt

38
Q

Represents a general claim to the issuers asset and cash flows

A

Unsecured debt

39
Q

All debt within the same category

A

Rank pari passu

40
Q

Independent bodies evaluating the financial strength of companies, assign ratings and assess risk of debt issue

A

Credit Rating agencies

41
Q

Debt with high rating, appropriate for good credit quality for investments containing certain level of credit risk

A

Investment grade debt

42
Q

Obligations with lower rating

A

Non-investment grade

43
Q

Top 3 credit rating agencies

A
  1. Fitch
  2. Moody’s
  3. Standard and POORS (S&P)
44
Q

Philippines is currently ranked lower medium grade

45
Q

Secured by specific types of equipment or physical asstes

A

Equipment trust certificate

46
Q

Debt obligations that represent claims to the cash flows from pools of mortgage loans, most commonly on residential property

A

Mortgage backed securities

47
Q

Guarantee received from 3rd party often called a guarantor

A

External credit enhancement

48
Q

4 C’s

A

Capacity
Collateral
Covenants
Character

49
Q

Underwriting process

A

Issuer
Lend Manager
Syndicate Member
Selling Agent

50
Q

Macroeconomic factors of a country

A

GDP
GNP
Inflation

51
Q

Fiscal and Monetary policies

A

Budget balance
External debt
Interest rates and yield curves

52
Q

Debt securities purchased and held with intention of selling within 1 yr

A

Held for trading

53
Q

Debt securities purchased for medium term

A

Available for sale

54
Q

Debt securities for investment, intending to hold until maturity

A

Held to maturity

55
Q

I = P x R x T/360

56
Q

PV =. FV / (1+rt)

57
Q

Fv = PV (1 + rt)

CFMP (5 decks)

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