Question 1

Which of the following statements regarding municipal bonds is false?

Accepted Answer

A) A single municipal bond issue will often contain a number of different maturity dates. Such issues are often called serial bonds because the bonds are scheduled to mature over a multiple number of years.

Question 2

________ are issued by Crown corporations of the Canadian federal government.

Accepted Answer

Crown corporations are government-owned entities that operate like businesses to provide goods and services to Canadians. They are able to issue agency bonds, which are debt securities issued by government-sponsored entities such as Crown corporations. Therefore, choice C is the correct answer. Zero-coupon government securities, separate tradings of registered interest and principals, and real return bonds may be issued by the Canadian federal government, but not specifically by Crown corporations.

Question 3

The Canadian government sells its domestic debt to financial market distributors and dealers through ________ run by ________.

Accepted Answer

The Canadian government sells its domestic debt through auctions, and these auctions are run by the Bank of Canada. This process is a common method for governments to raise funds by issuing government securities.

Question 4

Which of the following statements is false?

Accepted Answer

The Government of Canada does not frequently issue strip bonds, as these are a specialized type of bond that separates the interest payments from the principal payment, creating a series of zero-coupon bonds. While the government has issued strip bonds in the past, they are not a common method of issuing debt.

Question 5

Which of the following statements is false?

Accepted Answer

C) The issuer will exercise the call option only when the prevailing market rate is below the coupon rate of the bond.

Question 6

Which of the following statements is false regarding a call provision?

Accepted Answer

C) The call price is generally set at or above, and is expressed as a percentage of, the bond's face value.

Question 7

Two kinds of auctions are used by the Bank of Canada.The first type of auction is the ________,which is also called the discriminatory price auction and the second type of auction is the ________,which is used for real return bonds.

Accepted Answer

The first type of auction used by the Bank of Canada is the multiple-price auction, which is also called the discriminatory price auction. The second type of auction used for real return bonds is the single price auction. Therefore, option B is the correct choice. Option A and D are incorrect as they have reversed the types of auctions. Option C is incorrect as it mentions Dutch auction, which is not used by the Bank of Canada for its auctions.

Question 8

Suppose that in January 2001,the Canadian Treasury issued a ten-year inflation-indexed note with a coupon of 3 1/2%.On the date of issue the consumer price index (CPI)was 175.1.In January 2006,the CPI had increased to 198.3.What coupon payment was made on this bond in January 2006?

Accepted Answer

The answer of Suppose that in January 2001,the Canadian Treasury...

Question 9

Which of the following statements is false?

Accepted Answer

A) If the issuer fails to live up to any covenant, the issuer goes into default.

Question 10

Which of the following statements is false?

Accepted Answer

B) Treasury securities are initially sold to the public through auction.

Question 11

Which of the following statements is false?

Accepted Answer

A) In the case of a Treasury note or Treasury bond offering, the stop-out yield determines the coupon of the bond and then all bidders pay the par value for the bond or note.

Question 12

A ________ is a standard coupon bond and its outstanding principal is adjusted for ________.

Accepted Answer

A real return bond is adjusted for inflation to maintain the purchasing power of the principal amount.

Question 13

Which of the following statements is false?

Accepted Answer

A) When bond yields have decreased, by exercising the call on the callable bond and then immediately refinancing, the issuer can lower its borrowing costs.

Question 14

Fixed-coupon marketable bonds,more commonly known as ________,are ________ with original maturities of between 2 and 40 years.

Accepted Answer

The term "marketable bonds" refers to bonds that can be easily traded in the secondary market. Government of Canada bonds are commonly traded in the secondary market and are issued with fixed coupons. These bonds have original maturities of between 2 and 40 years and pay interest semiannually, making B the best choice. Canada Savings bonds are also issued by the government but have shorter-term maturities and pay interest annually.

Question 15

Which of the following statements is false?

Accepted Answer

A) By including more covenants, issuers decrease their costs of borrowing.

Question 16

The Government of Canada also issues ________ with maturities of up to ________ years.

Accepted Answer

The answer of The Government of Canada also issues ________...

Question 17

One of the ways that issuers repay bonds is to exercise a ________ provision that allows the issuer to repurchase the bonds ________.

Accepted Answer

A call provision allows the issuer to repurchase the bonds at a predetermined price (also known as the call price) before the maturity date. This price is usually higher than the current market price of the bonds, providing an incentive for bondholders to sell their bonds back to the issuer.

Question 18

________ and ________ are used by the Government of Canada.

Accepted Answer

According to the information given, the Government of Canada uses four kinds of domestic debt securities and three types of foreign debt securities. Therefore, option C is the correct answer. None of the other options match the information provided.

Question 19

In addition to the tradable securities,the Canadian government also borrows directly from ________ through ________ and Canada Premium Bonds.

Accepted Answer

The Canadian government borrows directly from individuals through Canada Savings Bonds and Canada Premium Bonds.

Question 20

All income from Government of Canada securities is ________ at the federal and provincial levels.If an investor sells a security before it matures,there may be ________.

Accepted Answer

Income from Government of Canada securities is taxable at both the federal and provincial levels. If an investor sells a security before it matures, there may be taxes on both interest income and capital gains.

Quiz 24: Debt Financing

Which of the following statements regarding municipal bonds is false?

________ are issued by Crown corporations of the Canadian federal government.

The Canadian government sells its domestic debt to financial market distributors and dealers through run by .

Which of the following statements is false?

Which of the following statements is false?

Which of the following statements is false regarding a call provision?

Two kinds of auctions are used by the Bank of Canada.The first type of auction is the ,which is also called the discriminatory price auction and the second type of auction is the ,which is used for real return bonds.

Suppose that in January 2001,the Canadian Treasury issued a ten-year inflation-indexed note with a coupon of 3 1/2%.On the date of issue the consumer price index (CPI)was 175.1.In January 2006,the CPI had increased to 198.3.What coupon payment was made on this bond in January 2006?

Which of the following statements is false?

Which of the following statements is false?

Which of the following statements is false?

A is a standard coupon bond and its outstanding principal is adjusted for .

Which of the following statements is false?

Fixed-coupon marketable bonds,more commonly known as ,are with original maturities of between 2 and 40 years.

Which of the following statements is false?

The Government of Canada also issues with maturities of up to years.

One of the ways that issuers repay bonds is to exercise a provision that allows the issuer to repurchase the bonds .

and are used by the Government of Canada.

In addition to the tradable securities,the Canadian government also borrows directly from through and Canada Premium Bonds.

All income from Government of Canada securities is at the federal and provincial levels.If an investor sells a security before it matures,there may be .