Question

2a)US Treasury Bonds are quoted according to

Select one:

A. its yield to maturity.

B. its yield to call.

C. discount yield.

D. a percentage of dollar price.

b)

Which of the following is not an example of an embedded option?

Select one:

A. Sinking fund provision

B. Warrant

C. Call provision

D. Conversion provision

c)The Put premium on a Putable Bond is

Select one:

A. the amount an issuer must pay above par value when putting (or selling) its bonds early.

B. the difference in interest an issuer must pay on its putable bonds over its non-callable bonds.

C. the amount of interest an issuer must pay on its putable bonds.

D. the amount an investor must pay above par value when putting (or selling) the bonds early.

d)Which of the following is most likely an issuer of bonds?

Select one:

A. Pension fund

B. Government

C. Community chest

D. Hedge fund

e)What is the role of the underwriter in an issue of securities?

i. Underwriters manage the sale of the securities and advise on the price at which the issue is sold. They then buy the securities from the issuing company and resell them to the public.

ii. The difference between the price at which the underwriter buys the securities and the price at which they are resold is the underwriter's spread. Underwriting firms have expertise in such sales because they are in the business all the time, whereas the company raises capital only occasionally.

Select one:

A. i.

B. no economic impact on exports.

C. both i and ii.

D. ii.

Answer 1

a]

US Treasury Bonds are quoted according to

D. a percentage of dollar price.

b]

A. Sinking fund provision. This is not an example of an embedded option. It is a a fund set aside by the company to ensure that when the bond becomes due, there are adequate funds available for redemption.

B and D are embedded options because they give the bond holder the option to purchase stock.

C is an embedded option because it gives the issuer the option to redeem the bond early.

c]

A. the amount an issuer must pay above par value when putting (or selling) its bonds early.

d]

Government is an issuer of bonds.

The remaining are all buyers or investors of bonds

e]

both i and ii.