Fixed Income
A 6% 25-year bond with semiannual payments has a market price of $850.00. The yield to maturity of this bond is closest to: A. 7.32%. b. 7.91%. C. 5.72%.
A
A 90-day commercial paper issue is quoted at a discount rate of 4.75% for a 360-day year. The bond equivalent yield for this instrument is closest to: A. 4.87%. b.4.81%. C. 4.75%.
A
Q. Clauses that specify the rights of the bondholders and any actions that the issuer is obligated to perform or is prohibited from performing are: A. covenants. B. collaterals. C. credit enhancements.
A
Q. Relative to an otherwise similar option-free bond, a: A. putable bond will trade at a higher price. B. callable bond will trade at a higher price. C. convertible bond will trade at a lower price.
A
Q. Relative to domestic and foreign bonds, Eurobonds are most likely to be: A. bearer bonds. B. registered bonds. C. subject to greater regulation.
A
Q. The provision that provides bondholders the right to sell the bond back to the issuer at a predetermined price prior to the bond's maturity date is referred to as: A. a put provision. B. a make-whole call provision. C. an original issue discount provision.
A
Stellar Corp. recently issued $100 par value deferred coupon bonds, which will make no coupon payments in the next four years. Regular annual coupon payments at a rate of 8% will then be made until the bonds mature at the end of 10 years. If the bonds are currently priced at $87.00, their yield to maturity is closest to: A. 6.0%. B. 8.0%. C. 10.1%.
A
Q. Which of the following best describes a negative bond covenant? The requirement to: A. insure and maintain assets. B. comply with all laws and regulations. C. maintain a minimum interest coverage ratio.
A A covered bond is a debt obligation backed by a segregated pool of assets called a "cover pool." When the assets that are included in the cover pool become non-performing (i.e., the assets are not generating the promised cash flows), the issuer must replace them with performing assets.
Consider two bonds that are identical except for their coupon rates. The bond that will have the highest interest rate risk most likely has the: A. lowest coupon rate. B. coupon rate closest to its market yield. C. highest coupon rate.
A A lower coupon rate means that more of the bond's value comes from repayment of face value, which occurs at the end of the bond's life.
A two-year spot rate of 5% is most likely the: A. yield to maturity on a zero-coupon bond maturing at the end of Year 2. B. coupon rate in Year 2 on a coupon-paying bond maturing at the end of Year 4. C. yield to maturity on a coupon-paying bond maturing at the end of Year 2.
A A spot rate is defined as the yield to maturity on a zero-coupon bond maturing at the date of that cash flow.
Q. Contrary to positive bond covenant, negative covenants are most likely: A. costlier. B. legally enforceable. C. enacted at time of issue.
A Affirmative covenants typically do not impose additional costs to the issuer, while negative covenants are frequently costly. B is incorrect because all bond covenants are legally enforceable rules, so there is no difference in this regard between positive and negative bond covenants. C is incorrect because borrowers and lenders agree on all bond covenants at the time of a new bond issue, so there is no difference in this regard between positive and negative bond covenants.
Which of the following is least likely a feature of an auto loan ABS? A. Non-amortizing collateral B.Overcollateralization C. Senior/subordinated tranche structure
A An auto loan ABS involves the use of amortizing collateral, that is, the cash flows for an auto loan ABS include interest payments, scheduled principal repayments, and any prepayments, if allowed.
An asset-backed securitization with a waterfall structure is most likely using which type of credit enhancement? A.Subordination B.Time tranching C. Special-purpose entity (SPE)
A Asset-backed securitizations can be structured with subordinated bond classes. They function as credit protection for the more senior bond classes; that is, losses are realized by the subordinated bond classes before any losses are realized by the senior bond classes. This type of protection is also commonly referred to as a waterfall structure because of the cascading flow of payments between bond classes in the event of default. The creation of bond classes that possess different expected maturities is referred to as time tranching. An SPE is a bankruptcy remote legal entity that holds the collateral and is considered not an enhancement but, rather, a prerequisite for establishing securitizations.
A South Korean electronics company issued bonds denominated in US dollars in the United States and registered with the SEC. These bonds are most likely known as a: A. foreign bond. B. Eurobond. C. global bond.
A Bonds issued by entities that are incorporated in another country are called foreign bonds. Therefore, the bonds issued by a South Korean company in the United States are known as foreign bonds. B is incorrect because Eurobonds are bonds issued internationally, outside the jurisdiction of any single country to bypass the legal, regulatory, and tax constraints imposed on bond issuers and investors. The bonds registered with the SEC are not classified as Eurobonds.
In a securitization structure, credit tranching allows investors to choose between: A. subordinated bonds and senior bonds. b. extension risk and contraction risk. C. partially amortizing loans and fully amortizing loans.
A Credit tranching allows investors to choose between subordinate and senior bond classes as a means of credit enhancement. The purpose of this structure is to redistribute the credit risk associated with the collateral.
As interest rates rise and fall, investors in mortgaged-backed securities most likely face what type of risk? A.Extension risk and contraction risk B.Single-month mortality (SMM) risk and contraction risk C. Conditional prepayment rate (CPR) risk and extension risk
A Extension risk (contraction risk) is the risk that when interest rates rise (decline), actual prepayments will be lower (higher) than forecasted. At lower rates, homeowners will refinance at the now-available lower interest rates. Thus, a security backed by mortgages will have a shorter maturity than was anticipated at the time of purchase. At higher rates, homeowners are reluctant to give up the benefits of a contractual interest rate that now looks low, thus slowing the prepayment on the securitization, leading to its longer maturity. SMM is a measure of prepayment and not a risk, and CPR is the corresponding annualized rate
A key distinction between commercial mortgage-backed securities (CMBSs) and residential mortgage-backed securities (RMBSs) is that CMBSs most likely: A. have balloon maturities. b.have amortizing principal. C. do not have call protection.
A Many commercial loans backing CMBSs are balloon loans that require a substantial principal repayment at maturity of the loan. If the borrower fails to make the balloon payment, the borrower is in default. CMBSs generally do not have amortizing principal as RMBSs do, and they do offer call protection.
Q. Which of the following type of debt obligation most likely protects bondholders when the assets serving as collateral are non-performing? A. Covered bonds B. Collateral trust bonds C. Mortgage-backed securities
A Negative covenants enumerate what issuers are prohibited from doing. Restrictions on debt, including maintaining a minimum interest coverage ratio or a maximum debt usage ratio, are typical examples of negative covenants.
An inverse floater will most likely have: A. a maximum coupon rate. b.a face value that changes as the reference rate changes. C. a coupon rate that changes by more than the change in the reference rate.
A The general formula for the coupon rate of an inverse floater is C - (L × R), where C is the maximum coupon rate if the reference rate (R) is equal to zero and L is the coupon leverage, which is greater than zero.
Q. A 10-year bond was issued four years ago. The bond is denominated in US dollars, offers a coupon rate of 10% with interest paid semi-annually, and is currently priced at 102% of par. The bond's: A. tenor is six years. B. nominal rate is 5%. C. redemption value is 102% of the par value.
A The tenor of the bond is the time remaining until the bond's maturity date. Although the bond had a maturity of 10 years at issuance (original maturity), it was issued four years ago. Thus, there are six years remaining until the maturity date
Which of the following is most likely a limitation of the yield to maturity measure? A. It assumes coupon payments can be invested at the yield to maturity. B. It does not consider the capital gain or loss the investor will realize by holding the bond to maturity. C. It does not reflect the timing of the cash flows.
A Yield to maturity does consider reinvestment income; however, it assumes that the coupon payments can be reinvested at an interest rate equal to the yield to maturity. This is one of the limitations for the yield to maturity measure because the investor is facing reinvestment risk (future interest rates will be less than the yield to maturity at the time the bond is purchased).
Consider a $100 par value bond with an 8% coupon paid annually, maturing in 20 years. If the bond currently sells for $96.47, the yield to maturity is closest to: A. 8.37%. B. 8.29%. C. 7.41%.
A A security with a present value of 96.47, 19 interest payments of 8, and a 20th payment of principal plus interest (108) has a yield to maturity of 8.37%.
Q. An affirmative covenant is most likely to stipulate: A. limits on the issuer's leverage ratio. B. how the proceeds of the bond issue will be used. C. the maximum percentage of the issuer's gross assets that can be sold.
B
Q. The legal contract that describes the form of the bond, the obligations of the issuer, and the rights of the bondholders can be best described as a bond's: A. covenant. B. indenture. C. debenture.
B
Q. Which of the following best describes a negative bond covenant? The issuer is: A. required to pay taxes as they come due. B. prohibited from investing in risky projects. C. required to maintain its current lines of business.
B
Q. Which of the following is a type of external credit enhancement? A. Covenants B. A surety bond C. Overcollaterization
B
Q. Which of the following provisions is a benefit to the issuer? A Put provision B Call provision C Conversion provision
B
The bonds of Apex Corporations have a par value of $10,000 each and an annual required rate of return of 10%. The bonds make quarterly coupon payments at an annual rate of 6% and have two years remaining until maturity. The current market price of each bond is closest to: A. $10,749. b.$9,283. C. $9,306.
B
Q. Investors seeking some general protection against a poor economy are most likely to select a: A. deferred coupon bond. B. credit-linked coupon bond. C. payment-in-kind coupon bond.
B A credit-linked coupon bond has a coupon that changes when the bond's credit rating changes. Because credit ratings tend to decline the most during recessions, credit-linked coupon bonds may thus provide some general protection against a poor economy by offering increased coupon payments when credit ratings decline.
The type of residential mortgage least likely to contain a "balloon" payment is a(n): A. interest-only mortgage. a. fully amortizing mortgage. C. partially amortizing mortgage.
B A fully amortizing mortgage is least likely to contain a balloon payment because the sum of all the scheduled principal repayments during the mortgage's life is such that when the last mortgage payment is made the loan is paid in full.
Ted Nguyen is an investor domiciled in a country with an original issue discount tax provision. He purchases a zero-coupon bond at a deep discount to par value with the intention of holding the bond until maturity. At maturity, he will most likely face: A. a capital gain. B. neither a capital loss nor gain. C. a capital loss.
B An original issue discount tax provision allows the investor to increase the cost basis of the bond, so when the bond matures, the investor faces no capital gain or loss.
If a bank wants the ability to retire debt prior to maturity in order to take advantage of lower borrowing rates, it most likely issues a: A. convertible bond. B. callable bond. C. putable bond.
B Callable bonds give issuers the ability to retire debt prior to maturity. The most compelling reason for them to do so is to take advantage of lower borrowing rates.
Which of the following is least likely an economic or financial implication of securitizations? A. They increase the amount of funds available to lend. b.They reduce the profitability of financial intermediaries. C. Investors can tailor interest rate and credit risk exposures.
B Financial intermediaries can improve their profitability by increasing loan origination and the related fees. The volume of loans originated would be greater than if they had to finance all the retained loans. Securitizations enable investors to tailor interest rate and credit risk exposures to suit their needs. Securitizations allows banks to increase the amount of funds available to lend since they need not hold onto the loans on their balance sheet.
Which of the following factors will most likely drive the repo margin lower? A. Lower quality of the collateral b.Shorter supply of the collateral C. Lower credit quality of the counterparty
B If the collateral is in short supply or if there is a high demand for it, repo margins are lower. Repo margin is the difference between the market value of the security used as collateral and the value of the loan.
An investor purchases a 5% coupon bond maturing in 15 years for par value. Immediately after purchase, the yield required by the market increases. The investor would then most likely have to sell the bond at: A. a premium. b. a discount. C. par.
B The bond would sell below par or at a discount if the yield required by the market rises above the coupon rate. Because the bond initially was purchased at par, the coupon rate equals the yield required by the market. Subsequently, if yields rise above the coupon, the bond's market price would fall below par.
Relative to a non-recourse mortgage loan, in a recourse mortgage loan the: A. lender can change the interest rate charged. B. borrower does not have a strategic default option. C. borrower is not liable for any shortfall between the property sale proceeds and the loan amount.
B There are recourse and non-recourse mortgage loans. In a non-recourse loan, the lender does not have a claim against the borrower and thus can look only to the property to recover the outstanding mortgage balance. In a recourse loan, the lender can seek to recover any shortfall from the sale of the property to cover the mortgage loan. The borrower, therefore, has a strategic default option only in non-recourse loans; for example, if the mortgage is greater than the property value, he may select to default without further personal obligation.
To obtain the spot yield curve, a bond analyst would most likelyuse the most: A. recently issued and actively traded corporate bonds. B. recently issued and actively traded government bonds. C. seasoned and actively traded government bonds.
B To obtain the spot yield curve, a bond analyst would prefer to use the most recently issued and actively traded government bonds. Such bonds will have similar liquidity as well as fewer tax effects because they will be priced closer to par value
In primary bond markets, the method of allowing certain authorized issuers to offer additional bonds to the general public by preparing a single, all-encompassing offering circular is most likely known as a(n): A. private placement. b.shelf registration. C. underwritten offering.
B Under a shelf registration, the issuer prepares a single, all-encompassing offering circular that describes a range of future bond issuances, all under the same document. This master prospectus can be in place for years before it is replaced or updated, and it can be used to cover multiple bond issuances in the meantime.
From the perspective of a CDO manager, an arbitrage collateralized debt obligation most likely differs from a traditional asset-backed security because it involves the: A.pooling of debt obligations. b.active management of the collateral. creation of a special purpose entity
B Unlike a traditional asset-backed security, an arbitrage collateralized debt obligation involves active management because the CDO manager buys and sells debt obligations with the objective of paying off different classes of bondholders as well as generating a high return for the subordinated/equity tranche and the manager.
ABL Ltd. is an Australian company that has financed a joint venture project in Singapore using a 15-year, fixed-rate bond paying semi-annual coupons that are denominated in Singapore dollars. The bond's par value, to be paid at maturity, is denominated in US dollars. This bond is an example of a: A. global bond. B. currency option bond. C. dual-currency bond.
C
DMT Corp. issued a five-year floating-rate note (FRN) that pays a quarterly coupon of three-month Libor plus 125 bps. The FRN is priced at 96 per 100 of par value. Assuming a 30/360-day count convention, evenly spaced periods, and constant three-month Libor of 5%, the discount margin for the FRN is closest to: A. 180 bps. b. 400 bps. C. 221 bps.
C
Q. A 10-year, capital-indexed bond linked to the Consumer Price Index (CPI) is issued with a coupon rate of 6% and a par value of 1,000. The bond pays interest semi-annually. During the first six months after the bond's issuance, the CPI increases by 2%. On the first coupon payment date, the bond's: A. coupon rate increases to 8%. B. coupon payment is equal to 40 C. principal amount increases to 1,020.
C
Q. A South African company issues bonds denominated in pound sterling that are sold to investors in the United Kingdom. These bonds can be best described as: A. Eurobonds. B. global bonds. C. foreign bonds.
C
Q. A bond that is characterized by a fixed periodic payment schedule that reduces the bond's outstanding principal amount to zero by the maturity date is best described as a: A. bullet bond. B. plain vanilla bond. C. fully amortized bond.
C
Q. A sovereign bond has a maturity of 15 years. The bond is best described as a: A. perpetual bond. B. pure discount bond. C. capital market security.
C
Q. An investor in a country with an original issue discount tax provision purchases a 20-year zero-coupon bond at a deep discount to par value. The investor plans to hold the bond until the maturity date. The investor will most likely report: A. a capital gain at maturity. B. a tax deduction in the year the bond is purchased. C. taxable income from the bond every year until maturity.
C
Q. If interest rates are expected to increase, the coupon payment structure most likely to benefit the issuer is a: A. step-up coupon. B. inflation-linked coupon. C. cap in a floating-rate note.
C
Q. Investors who believe that interest rates will rise most likely prefer to invest in: A.inverse floaters. B. fixed-rate bonds. C. floating-rate notes.
C
Which of the following contingency provisions in a bond most likely benefits the issuer? A. Put provision B. Conversion to common shares C. Call provision
C A call provision gives the issuer the right to redeem all or part of the bond before the specified maturity date to protect the issuer against a decline in interest rates. Therefore, it benefits the issuer and provides a lower future funding cost.
Q. A company has issued a floating-rate note with a coupon rate equal to the three-month Libor + 65 basis points. Interest payments are made quarterly on 31 March, 30 June, 30 September, and 31 December. On 31 March and 30 June, the three-month Libor is 1.55% and 1.35%, respectively. The coupon rate for the interest payment made on 30 June is: A. 2.00%. B. 2.10%. C. 2.20%.
C The coupon rate that applies to the interest payment due on 30 June is based on the three-month Libor rate prevailing on 31 March. Thus, the coupon rate is 1.55% + 0.65% = 2.20%.
AMK Corp. purchased US government bonds through the Bloomberg fixed-income electronic trading platform. This transaction is most likely known as: A. exchange traded. B.private placement. over-the-counter
C . In the over-the-counter market, buy and sell orders initiated from various locations are matched through a communication network, such as the Bloomberg fixed-income electronic trading platform.
Which of the following is most likely an example of a Eurobond? A. A Canadian borrower issuing British pound-denominated bonds in the UK market. b. A Japanese borrower issuing US dollar-denominated bonds in the US market. C. An Australian borrower issuing Canadian dollar-denominated bonds in the UK market.
C A Eurobond is an international bond issued outside the jurisdiction of any one country and not denominated in the currency of the country where it is issued.
Which of the following instruments is most likely to offer investors some protection against increases in the market interest rate? A. Inverse floating-rate notes B. Fixed-rate bonds C. Floating-rate notes
C A floating-rate note will be less affected when market interest rates increase because the coupon rate varies directly with market interest rates and is reset at regular intervals.
Q. A BBB rated corporation wishes to issue debt to finance its operations at the lowest cost possible. If it decides to sell a pool of receivables into a special purpose vehicle (SPV), its primary motivation is most likely to: A. receive a guaranty from the SPV to improve the corporation's credit rating. B. allow the corporation to retain a first lien on the assets of the SPV. C. segregate the assets into a bankruptcy-remote entity for bondholders.
C A key motivation for a corporation to establish a SPV is to separate it as a legal entity. In the case of bankruptcy for the corporation, the SPV is unaffected because it is not a subsidiary of the corporation. Given this arrangement, the SPV can achieve a rating as high as AAA and borrow at lower rates than the corporation.
Which of the following is least likely to be a form of internal credit enhancement associated with a corporate bond issue? A. Debt overcollateralization b. Debt subordination C. Letter of credit
C A letter of credit is a form of external credit enhancement in which a financial institution provides the issuer with a credit line to be used for any cash flow shortfalls related to its debt issue.
Which of the following is the best example of an embedded option granted to bondholders? A. An increasing sinking fund provision b. A prepayment option C. A put if the issuer's rating changes
C A put allows the bondholder to sell the security back to the issuer if the bondholder chooses to do so.
Which of the following terms in a bond issue most likely helps to reduce credit risk? A. Term maturity structure b. Floating-rate note C. Sinking fund arrangement
C A sinking fund arrangement is a way to reduce credit risk by making the issuer set aside funds over time to retire the bond issue.
Which of the following is least likely a short-term funding method available to banks? A. Central bank funds B. Negotiable certificate of deposits C. Syndicated loans
C A syndicated loan is a loan from a group of lenders, called the "syndicate," to a single borrower. Syndicated loans are primarily originated by banks, and the loans are extended to companies but also to governments and government-related entities.
Investors in commercial mortgage-backed securities (CMBS) face balloon risk, which is most likely a type of: A. call risk. b. contraction risk. C. extension risk.
C Balloon risk is the risk that the borrower will not be able to arrange for refinancing or sell the property to make the balloon payment typically associated with commercial loans backing CMBS. As a result, the CMBS may extend in maturity, implying that balloon risk is a type of extension risk.
During the lockout period for a non-amortizing asset-backed security, the principal payment of €100 million on a €1 billion face value issue will result in the security having a total face value of: A. €0.9 billion. b.€1.1 billion. C. €1.0 billion.
C During the lockout period any principal received is reinvested to acquire additional loans with a principal equal to the total principal received from the cash flow keeping the face value of the issue at €1 billion
An investor who owns a mortgage pass-through security is exposed to extension risk, which is the risk that when interest rates: A. fall, the security will effectively have a shorter maturity than was anticipated at the time of purchase. B. rise, the security will effectively have a shorter maturity than was anticipated at the time of purchase. C. rise, the security will effectively have a longer maturity than was anticipated at the time of purchase.
C Extension risk is the risk faced that when interest rates rise, fewer prepayments will occur because homeowners will be reluctant to give up the benefits of a contractual interest rate that is now lower than the market rate. As a result, the security becomes longer in maturity than anticipated at the time of purchase.
In the secondary market for corporate bonds, settlement typically occurs: A. the day after the trade. B. on the day of the trade. C. two or more days after the trade.
C In secondary markets, corporate bonds usually settle on a T + 2 or T + 3 basis—that is, two to three days after the trade. Government and quasi-government bonds settle in cash (on the day of the trade) or on a T + 1 basis.
In the securitization process, which of the following is most likely a third party to the transaction? The: A. seller of the collateral. b. special purpose entity. C. financial guarantor.
C In the securitization process, the seller of the collateral, the special purpose entity, and the servicer of the loan are the main parties. All other parties, including independent accountants, lawyers/attorneys, trustees, underwriters, rating agencies, and financial guarantors are third parties to the transaction.
Which of the following is least likely a characteristic of commercial paper? A. Short-term maturity B.Supported by credit enhancement C. Not rated by an independent agency
C Investors typically rely on ratings from independent rating agencies as well as their own credit analyses. The three major independent rating agencies provide ratings for commercial paper issues.
Quasi-governmental bonds are most likely: A. issued by a national government in a foreign currency. b.issued by a governmental body below the national level. C. repaid from cash flows generated by the issuer or from the project being financed.
C Quasi-governmental bonds are issued by entities created by national governments that are not governmental bodies. They do not generally have taxing authority and, therefore, must repay debt from cash flows they generate through fees for their services (e.g., servicing and insuring home mortgages) or cash flows generated by the projects they undertake (e.g., a toll highway or bridge).
The process of securitization is least likely to allow banks to: A. originate loans. B. reduce the layers between borrowers and ultimate investors. C. repackage loans into simpler structures.
C Securitization allows banks to originate (or create) loans, and the process results in a reduction in the layers between borrowers and ultimate investors. The loans are repackaged into more complex, not simpler, structures.
Which of the following are most likely a kind of supranational bonds? Bonds issued by the: A. Federal Farm Agency of the United States. b.Government of Malaysia. C. European Investment Bank.
C Supranational bonds are bonds issued by such supranational agencies as the European Investment Bank and the International Monetary Fund.
The best measure of the percentage of the outstanding mortgage balance prepaid in a given year is the: A. single monthly mortality rate. b.weighted average life. C. conditional prepayment rate.
C The conditional prepayment rate (CPR) is the annualized single monthly mortality (SMM) rate and is used to describe the assumed prepayment for a pool of mortgage loans by the end of the year.
An investor purchases the bonds of JLD Corp., which pay an annual coupon of 10% and mature in 10 years, at an annual yield to maturity of 12%. The bonds will most likely be selling at: A. par. B. a premium. C. a discount.
C The coupon rate on the bonds is lower than the yield to maturity, implying that the bonds should be selling at a price lower than their par value—that is, at a discount.
For non-amortizing, non-mortgage asset-backed securities, the lockout period most likely represents when: A. investors start receiving repayments. b.overcollateralization begins to be reduced. repaid principal is reinvested in loans of equal principal
C The lockout period, or revolving period, is the period during which the principal repaid is reinvested to acquire additional loans with a principal equal to the principal repaid. When the lockout period is over, any principal that is repaid will not be used to reinvest in new loans but will instead be distributed to the bond classes. Overcollateralization refers to a reserve account, often an excess spread account.
The repo margin on a repurchase agreement will most likely grow when: A. supply of collateral decreases. B.the quality of the collateral increases. C. the credit quality of the counterparty decreases.
C The repo margin, or haircut, is the discount between the value of the collateral and the amount of the loan. A larger haircut provides more protection in the case of a default. As the credit quality of the counterparty decreases, this greater protection is needed.
Which of the following is least likely to be a type of embedded option in a bond issue granted to bondholders? The right to: A. put the issue. B. convert the issue. C. call the issue.
C The right to call an issue is a type of embedded option granted to issuers, not bondholders. The other two rights are embedded options granted to bondholders.
When compared with an option-free bond, which type of bond most likely offers a higher yield to bondholders? A. Putable b.Convertible C. Callable
C A callable bond gives the issuer the right to buy back the bond prior to maturity. This feature increases the reinvestment risk faced by bondholders, causing them to require a higher yield than for a similar non-callable bond.
In the context of commercial mortgage-backed securities (CMBS) which of the following mechanisms is most likely a structural call protection? A. Prepayment lockouts B. Yield maintenance charges C. Sequential-pay tranches
C.
A plain vanilla and bullet bond only make interest payments prior to maturity. The entire principal repayment occurs at maturity. A. True B. False
True
A sovereign bond will most likely be: A. issued in the local currency. B. backed by the issuer's taxing authority. C. virtually free of credit risk when issued.
b The term sovereign bond refers to a debt security issued by a national government with taxing authority. These bonds are typically unsecured and backed by the government's ability to tax.
