Int'l Bus Fin Chapter 12

5. "Yankee" bonds are A. dollar-denominated foreign bonds originally sold to U.S. investors. B. yen-denominated foreign bonds originally sold in Japan. C. pound sterling-denominated foreign bonds originally sold in the U.K. D. none of the above

A

Because __________ do not have to meet national security regulations, name recognition of the issuer is an extremely important factor in being able to source funds in the international capital market. A. Eurobonds B. Foreign bonds C. Bearer bonds D. Registered bonds

A

Eurobonds are usually A. bearer bonds. B. registered bonds. C. bulldog bonds. D. foreign currency bonds.

A

In any given year, about what percent of new international bonds are likely to be Eurobonds rather than foreign bonds? A. 80% B. 45% C. 25% D. 15%

A

In contrast to many domestic bonds, which make _________ coupon payments, coupon interest on Eurobonds is typically paid _________. A. semiannual; annually B. annual; semiannually C. quarterly; semiannually D. quarterly; annually

A

Investors will generally accept a lower yield on ________ than on __________ of comparable terms, making them a less costly source of funds for the issuer to service. A. bearer bonds; registered bonds B. registered bonds; bearer bonds C. Eurobonds; domestic bonds D. domestic bonds; Eurobonds

A

Private placement bond issues A. do not have to meet the strict information disclosure requirements of publicly traded issues. B. have auditing requirements that do no adhere to publicly traded issues. C. meet the strict information disclosure requirements of publicly traded issues, but have larger minimum denominations. D. none of the above

A

Publicly traded Yankee bonds must A. meet the same regulations as U.S. domestic bonds. B. meet the same regulations as Eurobonds if sold to Europeans. C. meet the same regulations as Samurai bonds if sold to Japanese. D. none of the above

A

Unlike a bond issue, in which the entire issue is brought to market at once, _______ is partially sold on a continuous basis through an issuance facility that allows the borrower to obtain funds only as needed on a flexible basis. A. a Euro-medium term note issue B. bearer bond C. a Euro-long term note issue D. a Euro-short term note issue

A

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, A. physical transfer of the bonds seldom takes place. B. the physical transfer of the bonds takes place as much as 3 days later. C. the physical transfer of the bonds takes place as much as 6 weeks later. D. the physical transfer of bonds only occurs if the depository banks that physically store bond certificates are different for the buyer and seller.

A

Find the present value of a 2-year Treasury bond that pays a semi-annual coupon, has a coupon rate of 6%, a yield to maturity of 5%, a par value of $1,000 when the yield to maturity is 5%. A. $1,018.81 B. $1,231.15 C. $699.07 D. none of the above

A N = 4 I/Y = 2.5 PMT = 30 FV = 1000 PV = ? = 1018.81

Find the price of a 30-year zero coupon bond with a €1,000 par value that has a yield to maturity of i€ = 5 percent. A. €231.38 B. €432.20 C. €4,321.94 D. none of the above

A. N = 30 I/Y = 5 PMT = 0 FV = 1000 PV = ? = 231.38

"Dragon" bonds are A. dollar-denominated foreign bonds originally sold to U.S. investors. B. dollar-denominated bonds originally sold in Asia with non-Japanese issuers. C. pound sterling-denominated foreign bonds originally sold in the U.K. D. none of the above

B

6. "Samurai" bonds are A. dollar-denominated foreign bonds originally sold to U.S. investors. B. yen-denominated foreign bonds originally sold in Japan. C. pound sterling-denominated foreign bonds originally sold in the U.K. D. none of the above

B

A "global bond" issue A. is a very large international bond offering by several borrowers pooled together. B. is a very large international bond offering by a single borrower that is simultaneously sold in several national bond markets. C. has higher yields for the purchasers. D. has a lower liquidity.

B

In terms of the types of instruments offered, A. the Yankee bond market has been more innovative than the international bond market. B. the international bond market has been much more innovative than the U.S. market. C. the most innovations have come from Milan, just like any other fashion. D. none of the above

B

One unintended consequence of Sarbanes-Oxley A. is that international companies are starting to prefer issuing Eurobonds bonds in the private placement market in the U.S. to avoid costly information disclosure required of registered bonds. B. is that international companies are starting to prefer to issue Yankee bonds in the private placement market in the U.S. C. is that international companies are starting to prefer issuing Yankee bonds in the bearer bond market in the U.S. to avoid costly information disclosure required of registered bonds. D. is that international companies have left the bond market in the U.S. to avoid costly information disclosure required of registered bonds.

B

Shelf registration A. allows the shelves in a set of bookshelves to remain level. B. allows an issuer to preregister a securities issue, and then "shelve" the securities for later sale. C. allows an investment bank to increase the fees they charge by charging for storage of the "shelved" securities. D. eliminates the information disclosure that many foreign firms found objectionable in the foreign bond market.

B

Find the present value of a 3-year bond that pays an annual coupon, has a coupon rate of 6%, a yield to maturity of 5%, a par value of €1,000 when the yield to maturity is 5%. A. €1,018.81 B. €1,027.23 C. €1,099.96 D. none of the above

B N = 3 I/Y = 5 PMT = 60 FV = 1000 PV = ? = 1027.23

"Bulldog" bonds are A. dollar-denominated foreign bonds originally sold to U.S. investors. B. yen-denominated foreign bonds originally sold in Japan. C. pound sterling-denominated foreign bonds originally sold in the U.K. D. none of the above

C

A "bearer bond" is one that A. shows the owner's name on the bond. B. the owner's name is recorded by the issuer. C. possession is evidence of ownership. D. both a and b

C

A global bond issue denominated in U.S. dollars and issued by U.S. corporations A. trade as Eurobonds overseas. B. trade as domestic bonds in the U.S. domestic market. C. both a and b D. none of the above

C

The credit rating of an international borrower A. depends on the volatility of the exchange rate. B. depends on the volatility, but not absolute level, of the exchange rate. C. is usually never higher than the rating assigned to the sovereign government of the country in which it resides. D. is unrelated to the rating assigned to the sovereign government of the country in which it resides.

C

There are two types of equity related bonds: A. convertible bonds and dual currency bonds. B. convertible bonds and kitchen sink bonds. C. convertible bonds and bonds with equity warrants. D. callable bonds and exchangeable bonds.

C

With regard to dual-currency bonds versus comparable straight fixed-rate bonds, A. dual currency bonds usually trade at a premium to reflect the value of the forward contract implicit in their repayment schedule. B. the interest on dual-currency bonds is usually lower than on comparable straight fixed-rate debt. C. the interest on dual-currency bonds is usually higher than on comparable straight fixed-rate debt. D. none of the above

C

A "Eurobond" issue is A. one denominated in a particular currency but sold to investors in national capital markets other than the country that issued the denominating currency. B. usually a bearer bond. C. for example a Dutch borrower issuing dollar-denominated bonds to investors in the U.K., Switzerland, and the Netherlands. D. all of the above

D

A "registered bond" is one that A. shows the owner's name on the bond. B. the owner's name is recorded by the issuer. C. the owner's name is assigned to a bond serial number recorded by the issuer. D. all of the above

D

Floating-rate notes (FRN) A. experience very volatile price changes between reset dates. B. are typically medium-term bonds with coupon payments indexed to some reference rate (e.g. LIBOR). C. appeal to investors with strong need to preserve the principal value of the investment should they need to liquidate prior to the maturity of the bonds. D. both b and c

D

Proportionately more domestic bonds than international bonds are denominated in the ______ and the ______ while more international bonds than domestic bonds are denominated in the _________ and the ________. A. Euro; yen; dollar; pound sterling B. Dollar; pound sterling; euro; yen C. Euro; pound sterling; dollar; yen D. Dollar; yen; euro; pound sterling

D

Purchasers of global bonds are A. mainly institutional investors to date. B. desirous of the increased liquidity of the issues. C. have been willing to accept lower yields. D. all of the above

D

The Eurobond segment of the international bond market A. is roughly four times the size of the foreign bond segment. B. has considerably less regulatory hurdles than the foreign bond segment. C. typically has a lower rate of interest that borrowers pay in comparison to Yankee bond financing. D. all of the above

D

Zero coupon bonds A. pay interest at zero percent. B. are sold at a discount from par value. C. are attractive to Japanese investors who are not required to pay taxes on capital gains. D. both a and b.

D