Question

19. Which of the following statement is TRUE regarding zeros? A) The interest rate on zeros is almost always close to zero B) Zeros are sold on a discounted basis C) The interest paid on zeros is subject to taxation D) A Junk bond is an example of a zero E) None of the above statements is true

20. If your non-bank corporation enters into an overnight reverse repurchase agreement your corporation is A) Borrowing fed funds temporarily B) Selling a security now while agreeing to buy it back tomorrow C) Giving an unsecured loan to the counterparty D) Procuring a banker's acceptance E) None of the above

Answer 1

19. B) Zeros are sold on a discounted basis is TRUE
Zero means zero-coupon bond. A option is incorrect because The interest rate on zeros is almost always zero. B) Zeros are sold on a discounted basis is TRUE since zero-coupon bonds are always sold at a discount and matures at par. C is again incoe=rrect since there is no interest paid. Also, a junk bond is not a zero.

20. E) None of the above
Since no one of them must be true for the given condition to satisfy.

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answered by: anonymous