Question

4. A liquid secondary bond market allows an investor to sell a bond at:

A. the desired price

B. a price at least equal to the purchase price

C. a price close to the bond’s fair market value

5. If investors are increasingly pessimistic about the economy, what is the most likely impact on credit spreads?

A. There will be no change to credit spreads. Equity markets work independently from fixed-income markets.

B. Narrower spreads will occur. Investors are less concerned about creditworthiness.

C. Wider spreads will occur. Investors will move out of equity markets into debt markets.

6. Which of the following is the “Four Cs of credit analysis” used by analysts to evaluate creditworthiness??

A. Capacity, collateral, covenants, character analysis

B. Customer, collateral, covenants, character analysis

C. Capacity, collateral, covenants, cyclicality analysis

7. Which forward rate cannot be computed from the 1-, 2-, 3-, and 4-year spot rates? The rate for a:

A. 1-year loan beginning in 2 years

B. 2-year loan beginning in 2 years

C. 3-year loan beginning in 2 years

Answer 1

(1) A liquid secondary bond market allows an investor to sell a bond at:

Ans: Option C ,a price close to the bond’s fair market value.

(2) If investors are increasingly pessimistic about the economy, what is the most likely impact on credit spreads?

Ans: Option C , Wider spreads will occur. Investors will move out of equity markets into debt markets.

(3)  Which of the following is the “Four Cs of credit analysis” used by analysts to evaluate creditworthiness??

Ans: Option A ,Capacity, collateral, covenants, character analysis.

(4)  Which forward rate cannot be computed from the 1-, 2-, 3-, and 4-year spot rates? The rate for a

Ans: Option C , 3-year loan beginning in 2 years.