CCS Batch 4 - Quiz 2

Debt securities are often called fixed income securities because ________.

• They are held predominantly by older people who are living on fixed incomes

• They promise either a fixed stream of income or a stream of income determined by a specific formula

• The government fixes the maximum rate that can be paid on bonds

• They pay a fixed amount at maturity

A Corporate debt instrument's rating movement from AAA to AA indicates: _________.

• Deterioration in Country's Economic parameters

• Changes in Central bank policies

• Change in Government regime in domestic market

• Deterioration in issuer's financial capability

Ratings of a bond determine its spreads over ________.

• Derivatives

• Sovereign bonds

• Currencies

• Issuers

Which bonds refer to the debt securities issued by a state to finance its capital expenditure?

• SDLs

• GOI securities

• Gilt edged securities

• Municipal bonds

The rate of interest paid on the bond is referred to as _______ payment.

• Capital depreciation

• Capital appreciation

• Coupon

• Principal

The holders of which of these will be paid last in case of a company's default?

• Senior unsecured bonds

• Junior debt

• Equity

• Senior debt

Bond prices behave ________ with interest rates.

• Normally

• Parallel

• Equally

• Inversely

Which of these bonds has almost zero credit risk and almost zero interest rate risk

• (a) T-bills

• (b) G-secs

• (c) Commercial papers

• (a) and (b)

Which of these bonds carries interest rate risk, but has almost zero credit risk 

• (a) T-bills

• (b) G-secs

• (c) Commercial papers

• (a) and (b)

If all other things (i.e. Face Value, Coupon, Tenure and Maturity) are constant, which of the following bonds (of a same issuer) would be available at the highest price:

i. Plain Vanilla Bond
ii. Bond with a Call Option
iii. Bond with a Put Option
iv. Bond with a Conversion Option

• ii

• Either ii or iv

• iv

• Either iii or iv