WorksheetsIFE S7 Bond Markets
Total questions: 10
Worksheet time: 5mins
What is a bond?
It is a financial asset that gives the holder a claim on future profits of the firm.
It is a business contract arranged between suppliers and the firms that can be resold on financial markets.
It is an insurance contract that is transferable to family members.
It is a certificate that gives the holder a claim to future cash flows.
What is the maturity of a bond?
It is the time to expiration of a bond.
It is the last payment that a bond promises.
It is the percentage return of a bond.
It is the size of one single regular payment of a bond.
What is the face value of a bond?
It is the time to expiration of a bond.
It is the last payment that a bond promises.
It is the percentage return of a bond.
It is the size of one single regular payment of a bond.
What is a coupon?
It is the time to expiration of a bond.
It is the last payment that a bond promises.
It is the percentage return of a bond.
It is the size of one single regular payment of a bond.
Which bond type can be expected to care the least risk of default?
A high quality bond
A treasury bill
A junk bond
A gilt
Consider a bond that expires after one year and pays £100 on expiration without making any payments in between. What is the yield of this bond if the price is £98.5?
The yield is approximately 2.5%.
The yield is approximately 0.025%.
The yield is approximately 1.52%.
The yield is approximately 15.2%.
Consider a demand and supply graph of a bond market. Usually, the vertical axis will measure…
the quantity of the bond.
the yield of the bond.
the face value of the bond.
the price of the bond.
Consider a supply and demand diagram for the bond market. Assuming all else equal, what will happen if suddenly more business opportunities arise?
The supply curve will shift to the right meaning that bond prices decrease and hence the yield increases.
The demand curve will shift to the right meaning that bond prices increase and hence the yield decreases.
The supply curve will shift to the left meaning that bond prices increase and hence the yield decreases.
The demand curve will shift to the left meaning that bond prices decrease and the yield decreases.
Consider a demand and supply diagram for the bond market. Assuming all else equal, what will happen if investors believe inflation will increase?
The supply curve will shift to the right meaning that bond prices decrease and hence the yield increases.
The demand curve will shift to the right meaning that bond prices increase and hence the yield decreases.
The supply curve will shift to the left meaning that bond prices increase and hence the yield decreases.
The demand curve will shift to the left meaning that bond prices decrease and the yield increases.
What does the Market Segmentation Theory state?
It states that an inverted yield curve is a sign that investors are expecting a recession.
It states that the yield curve is decreasing because investors expect a lower yield in the future.
It states that a decreasing yield curve is impossible because the bonds with a short maturity are more liquid than the bonds with a long maturity.
It states that the shape of the yield curve could be due to different type of investors in the market conducting large transaction.
