Fixed-Interest Bonds

 What is a fixed-interest bond?

• A loan where the interest rate changes annually

• A securitized loan that pays a fixed income (coupon)

• A stock that earns dividends quarterly

• A deposit account with flexible withdrawal

Which of the following is a feature of a bond?

• Pays interest only at redemption

• Has no maturity date

• Pays fixed coupon payments, usually semi-annually

• Is only issued by corporations

Which type of bond is issued by a foreign borrower but denominated in the local currency?

• Domestic bond

• Eurobond

• Corporate bond

• Foreign bond

In which market is accrued interest calculated using the actual number of days between coupon payments and a 365-day year?

• Eurobond market

•  US Treasury bond market

• British Government bond market

• Swiss bond market

Which of the following is TRUE about Eurobonds?

• They are issued only in the US and paid semi-annually

• They are taxed by the issuing country

• They are issued internationally and usually pay annual interest without tax deduction

• They are always denominated in the Euro currency

What is the main difference between domestic and foreign bonds?

• Only domestic bonds pay interest

• Foreign bonds are always risk-free

•  Domestic bonds are issued by a local borrower, foreign bonds are issued by a foreign borrower in local currency

• Domestic bonds can only be bought by citizens

A British Government bond pays a 15% annual coupon. If the settlement date is 15 July and the last coupon was paid on 27 April, what is the number of days used to calculate accrued interest?

• 90

• 79

•  75

• 85