The risk of loss resulting from the issuer failing to make full and timely payment of interest is called:
A. credit risk
B. systemic risk
C. interest rate risk
The type of bond that allows bondholders to choose the currency in which they receive each interest payment and principal payment is a:
A. Pure discount bond.
B. Dual-currency bond.
C. Currency option bond.
The individual or entity that most likely assumes the role of trustee for a bond issue is a:
A. A financial institution appointed by the issuer
B. The treasurer or CFO of the issuer
C. A financial institution appointed by a regulatory authority.
An example of a domestic bond is a bond issued by:
A. LG Group from South Korea, denominated in GBP, and sold in the UK.
B. The UK Debt management Office, denominated in GBP, and sold in the UK.
C. Wal-Mart from the U.S., denominated in the US dollars, and sold in various countries in North America, Europe, the Middle East, and Asia Pacific.
A plain vanilla bond has a maturity of 10 years, a par value of $100, and a coupon rate of 9%. Interest payments are made annually. The market interest rate is assumed to be constant at 9%. The bond is used and redeemed at par. The principal repayment the first year is closest to:
A. $0.00
B. $6.58
C. $10.00
The US Treasury offers Treasury Inflation-Protected Securities (TIPS). The principal of TIPS increases with inflation and decreases with deflation based on changes in the US CPI. When TIPS mature, an investor is paid the original principal or inflation-adjusted principal, whichever is greater. TIPS pay interest twice a year based on a fixed real coupon rate that is applied to the inflation adjusted principal. TIPS are most likely:
A. Capital-indexed bonds.
B. Interest-indexed bonds
C. Indexed-annuity bonds.