Question 1

In the bond market,there are brokers and market makers.Which of the following are true?

Accepted Answer

All of the options are true. Brokers accept buy or sell orders from market makers and attempt to find a matching party. They may also trade for their own account. Brokers charge a commission for their services, and they do not deal directly with retail clients.

Question 2

The underwriting syndicate of a bond offering is

Accepted Answer

The answer of The underwriting syndicate of a bond offering...

Question 3

Investors in corporate bonds would still be interested in sovereign credit ratings

Accepted Answer

Sovereign credit ratings usually represent a ceiling on corporate credit ratings within the country, meaning that corporate bonds in that country cannot have a higher credit rating than the government. Investors in corporate bonds would still be interested in sovereign credit ratings for this reason.

Question 4

The credit rating of an international borrower

Accepted Answer

The credit rating of an international borrower is usually never higher than the rating assigned to the sovereign government of the country in which it resides. This is because the borrower's creditworthiness is inherently tied to the conditions and stability of its home country. Therefore, the borrower's rating is limited by the rating of the sovereign government.

Question 5

With regard to clearing procedures for bond transactions,when a transaction is conducted,electronic book entries are made that transfer book ownership of the bond certificates from the seller to the buyer and transfer funds from the purchaser's cash account to the seller's.However,

Accepted Answer

Electronic book entries are sufficient to transfer ownership of the bond certificates, so physical transfer of the bonds is rare.

Question 6

Underwriters for a domestic bond issue will commit their own capital to buy the issue from the borrower at a discount from the issue price.The discount,or underwriting spread,is typically

Accepted Answer

The underwriting spread for a domestic bond issue is typically in the 1 to 1.5 percent range. This spread compensates the underwriters for their services and the risks they take by committing their own capital.

Question 7

A disproportionate share of Eurobonds have high credit ratings in comparison to domestic and foreign bonds.(Approximately 40 percent of Eurobond issues are rated AAA and 30 percent are AA).Explanations for this include

Accepted Answer

The correct answer is D because it combines two valid explanations for why Eurobonds tend to have high credit ratings: issuers with low ratings can withdraw their ratings before publication, and the market is generally accessible only to firms with already good credit ratings and name recognition.

Question 8

The Wall Street Journal publishes daily values of yields to maturity for Japanese,German,British,and Canadian Government bonds.

Accepted Answer

The Wall Street Journal's publication of daily values of yields to maturity for various government bonds allows bond market participants to compare both the yield curve and the term structure of interest rates of different countries.

Question 9

The key driver of a sovereign's economic assessment is

Accepted Answer

All of the options are key drivers of a sovereign's economic assessment. Income levels and growth prospects are factors that indicate the current and future state of the economy, while economic diversity and volatility demonstrate the resilience and stability of the country's economic structure. A comprehensive evaluation of a sovereign's economic performance would take all of these factors into consideration.

Question 10

In any year,the Eurobond segment of the international bond market accounts for approximately what percent of new bond offering?

Accepted Answer

The answer of In any year,the Eurobond segment of the...

Question 11

Two major clearing systems for international bond transactions are

Accepted Answer

Euroclear and Clearstream International are two major clearing systems for international bond transactions. They provide services such as settlement, custody, and safekeeping of securities for investors and financial institutions. These systems help in reducing the settlement and counterparty risks associated with cross-border bond transactions.

Question 12

The J.P.Morgan and Company Global Government Bond Index is ________ representation of the individual country government bond indexes.

Accepted Answer

The J.P.Morgan and Company Global Government Bond Index is a value-weighted representation of the individual country government bond indexes. This means that the index is calculated based on the market value of the outstanding bonds issued by each country, giving more weight to countries with larger bond issuances.

Question 13

With regard to clearing procedures for bond transactions

Accepted Answer

Clearing procedures for bond transactions are both a system for transferring ownership of bonds and a system for ensuring payment from buyers to sellers. Most Eurobond trades clear through two major clearing systems, making option C also correct. Therefore, the best choice is D - all of the options.

Question 14

A bond market index

Accepted Answer

A bond market index is similar to a stock market index in that it tracks the performance of a group of assets. However, instead of tracking stock prices, a bond market index tracks the prices of a group of bonds. It is not related to setting coupon rates for adjustable rate bonds nor is it a price-weighted average of all bonds in existence.

Question 15

Market makers in the secondary bond market

Accepted Answer

Market makers in the secondary bond market stand ready to buy or sell for their own account, quote bid and ask spreads, and may trade directly with one another, through a broker or with retail customers. Therefore, all of the options are correct.

Question 16

Eurobond market makers and dealers are members of the ________,a self-regulatory body based in Zurich.

Accepted Answer

The International Capital Market Association (ICMA) is a self-regulatory organization based in Zurich that governs the Eurobond market. Eurobond market makers and dealers are members of this organization, which plays a key role in setting standards for the issuance, trading, and settlement of international securities. The ICMA also provides a platform for market participants to engage in dialogue and collaborate on market practices and regulatory issues.

Question 17

Underwriters for an international bond issue will commit their own capital to buy the issue from the borrower at a discount from the issue price.The discount,or underwriting spread,is typically

Accepted Answer

The underwriting spread for an international bond issue is typically in the 2 to 2.5 percent range. This means that the underwriters commit their own capital to buy the bonds from the borrower at a discount of 2-2.5% from the issue price. This spread covers the underwriters' expenses and compensates them for the risk they bear in buying the bonds and reselling them to investors.

Question 18

One of the five main sovereign rating factors,institutional assessment,comprises an analysis of how a government's institutions and policymaking affect a sovereign's credit fundamentals by

Accepted Answer

Institutional assessment comprises of an analysis of how a government's institutions and policymaking affect all three aspects of a sovereign's credit fundamentals, namely delivering sustainable public finances, promoting balanced economic growth, and responding to economic or political shocks.

Question 19

The secondary market for Eurobonds

Accepted Answer

The secondary market for Eurobonds is an over-the-counter market, meaning that trades are conducted directly between buyers and sellers rather than through an organized exchange.

Question 20

The role of an underwriter is to

Accepted Answer

The role of an underwriter is to help negotiate terms with the borrower, ascertain market conditions, and manage the issuance. Therefore, option D, "all of the options," is the correct choice.

Quiz 12: International Bond Market