Chapter 3 International bond market review

Which one of the following is true about the difference between stocks and bonds?

• Stocks are ownership in a company while bonds are debt instruments.

• Stocks pay interests and bonds pay dividends

• Stocks are negotiated in the local market and bonds in the foreign market.

• International bonds can be purchased locally but international stocks cannot.

Imagine that you are an investor buying a bond in Pounds, issued by a Chinese company operating in UAE. What type of international bond are you buying?

• Domestic bond

• Foreign bond

• Euro bond

• A mutual fund

Which one of the following cannot be considered as a source of borrowed fund for a company?

• Bonds

• Bank loans

• Commercial papers

• Stocks

Which of the following is true about issuing an international bond

• Small companies can easily raise capital using an international bonds

• As companies grow they first issue bonds in the domestic market and then move to the international market when the funds required is beyond the capacity of the domestic market.

• Raising capital through stocks is much easier than using bonds

• None of the above is true

_______ is a bond that has no any option attached and pays fixed coupon rate.

• Floating rate notes

• Convertible bonds

• Equity related bonds

• Fixed rate bonds

Which one of the following is true about floating rate bonds?

• Coupon rates are adjusted every 3 or 6 months based on LIBOR rate

• Coupon rate remains fixed

• The bond can be converted into an equity by due date

• All of the above are true

_______ is a bond that allows the investor to exchange the bond for equity shares by due date or on a predetermined date and price.

• Equity related bond

• Convertible bond

• Fixed rate bond

• Floating rate bond

Which one of the following is not true about zero coupon bond?

• It is sold at a discount

• Coupon is not paid

• It is sold at a premium

• All of the above are not true