Underlying Markets Flashcards
Which of the following is NOT a characteristic of a warrant?
Warrants can only be issued to existing shareholders
Which of the following is most likely to drive oil prices up?
War in the Middle East
Banks accepting deposits in the inter bank market use which of the following as the average rate quote?
LIBID
The graph of a yield curve is the representation of which of the following?
Yields and maturities
Which of the following might explain why sugar prices would be less affected by bad weather in a region than cocoa prices?
Sugar is produced in more than one region
When there is a normal yield curve, which of the following is TRUE?
A short-dated 5% coupon gilt will have a lower-yield than a long-dated 5% coupon gilt
Bonds are used to fund the:-
Budget deficit
For which of the following is the Bank of England responsible?
Setting sterling interest rates
What is the standard settlement for UK corporate bonds in CREST after the trade?
Two business days
The US equivalent of LIBOR is:
Fed funds rate
Which organisation has been given the responsibility for the administration of LIBOR?
ICE Benchmark Administration
What rate is derived from a gilt sale and repurchase?
Repo rate
The highest expected gearing to share price movements would be:
Warrants exercisable until 2019
Which of the following is the best description of a collateralised debt obligation (CDO) squared?
A CDO that is created from a basket of CDOs
bid/offer
left/right
What is represented by the yield curve?
The maturity range of a bond series against their respective yields
Forward adjustments are always expressed in pips (also known as FX points).
A pip is usually the fifth significant figure of the rate
An investor purchases a call covered warrant. What type of investment have they bought?
Option to buy existing shares issued by a third party
JGBs normally have a maturity
of ten years.
How are T-bills usually issued?
By tender offer
Investing in preference shares is similar to investing in bonds because:
Dividends on preference shares are usually fixed
FX quotes are typically quoted to 5 significant figures.
A pip is the fifth significant figure.
A time deposit commonly offered to consumers by banks and other financial institutions for a period of 3 to 6 months is the best description of which of the following:
Certificate of Deposit
The adjustment to the spot rate
is quoted in ticks
A bond is currently trading as a 4% Treasury 2029 aft. How would the LSE classify this gilt?
An undated gilt
Which of the following is true concerning US T-bonds?
They are all registered
They are not issued with a zero-coupon
In relation to warrants, which of the following is FALSE?
They must be exercised on expiry
Which of the following should happen when a credit rating on a bond goes down by a ‘notch’, assuming all other things being equal?
The bond’s price drops
The bond’s yield increases
A report of supply problems for North Sea gas would result in which of the following for gas futures?
Prices would increase
If a client suggested that he felt the yield curve was steepening, what would he most likely mean?
Longer-yields are rising
Japanese government bonds are issued with a normal maturity of how many years?
10
Which ONE of the following best represents ten basis points?
0.1%
Which yield curve reflects prices and yields moving in the same direction for different maturities?
Neither
If an investor expects the Japanese interest rates to rise faster than the Euro rates which spread transaction should he undertake?
Sell the Japanese government bond future, buy the German government bond future
Which is true regarding cumulative preference shares?
Dividends are paid from undistributed profits
Shareholders’ rights are governed by the issuing company’s articles of association
Which of the following ARE characteristics of US Treasury bonds?
They have a life in excess of ten years
They are registered instruments
They always pay a coupon
They are the US equivalent of gilts
Which of the below is the best description of a Hybrid derivative?
Combining two different types of derivatives in one contract
Which of the following would cause an increase in the price of emission rights?
The announcement by the government of the closure of nuclear power stations
Which of the following is the largest user of silver?
Jewellery
Which of the following credit ratings is assigned to a bond in default by Fitch?
D
Which metal is used in the production of galvanisation brass?
Zinc
Which of the following best describes the repo rate?
The interest rate implied by the difference between the sale and repurchase price of an asset
Gilts are:
UK government bonds
Which of the following is NOT one of the cryptocurrencies?
Bitripple
