Topic 3 - Debt Markets

Topic 3 - Debt Markets - BANK 1005 Derivatives and...

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BANK 1005 Derivatives and Securities Markets P a g e | 1 TOPIC 3 – DEBT MARKETS MULTIPLE CHOICE QUESTIONS 1. A coupon bond is a debt security that _________. A) Pays interest on a regular basis (typically every six months) B) Does not pay interest on a regular basis but pays a lump sum at maturity C) Can always be converted into a specific number of shares of common stock in the issuing company D) Always sells at par E) None of the above 2. Money market securities ____________. A) Have short term maturity B) Are sold at a discount on face value C) Are highly marketable D) Generally have very low risk E) All of the above 3. Which one of the following is not a money market instrument? A) A Treasury bill or note B) A negotiable certificate of deposit C) Commercial bill D) A Treasury bond E) A bank-accepted bill 4. What does the term “negotiable” mean with regard to negotiable certificates of deposit? A) The CD can be sold to another investor if the owner needs to cash it in before its maturity date. B) The rate of interest on the CD is subject to negotiation. C) The CD is automatically reinvested at its maturity date. D) The CD has staggered maturity dates built in. E) The interest rate paid on the CD will vary with a designated market rate. 5. In order for you to be indifferent between the after tax returns on a corporate bond paying 9% and an after tax rate of 7%, what would your income tax rate need to be? A) 17.6% B) 27% C) 22.2% D) 19.8% E) Cannot tell from the information given 6. Over the past year you earned a nominal rate of interest of 10 percent on your money. The inflation rate was 5 percent over the same period.
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Topic 3 - Debt Markets - BANK 1005 Derivatives and...

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