Questions and Answers of Bond Markets Analysis And Strategies

What characteristics of a capital market distinguish developed, emerging, and frontier capital markets?
Why would a local government issue a taxable bond when that results in paying a higher interest rate compared to issuing a tax-exempt bond?
Give two reasons why an issuing municipality would want to refund an outstanding bond issue.
The supplemental prospectus of an actual offering by Royal Bank of Canada states the following:a. What type of structured note is this?b. What are the risks associated with investing in this
What is a payment-in-kind bond?
Suppose that eight years ago a corporation issued a 15-year bond with a coupon rate of 7% and the indenture specifies a make-whole call premium of 25 basis points over the yield on a comparable
On August 2, 2020, Lord & Taylor, the 194-year-old U.S. department store chain, filed for bankruptcy protection. A week earlier, two other department store chains, JCPenney and Neiman Marcus, did the
What is created as a result of coupon stripping in the Treasury market?
In a Treasury auction, what is meant bya. a noncompetitive bidder?b. the high yield?
What is the when-issued market?
In the search for a replacement for LIBOR, SOFR has been suggested. If there is a high correlation between LIBOR and SOFR, then in existing financial products that call for the use of LIBOR, using
You are a financial advisor and are approached by a client who has asked when interest rates are expected to increase to the levels achieved at the end of the twentieth century. How would you respond?
How do negative interest rates impact defined-benefit pension plans?
What are the potential adverse consequences of negative interest rates for banks?
Why can a negative interest-rate policy result in an allocation of funds by investors to very risky assets and potentially cause a price bubble?
Explain what happens if an investor buys a short-term government security when there is a negative interest rate.
Explain why you agree or disagree with the following statement: negative real interest rates cannot exist in an economy that is properly functioning.
Explain why you agree or disagree with the following statements:a. A bond issued by a corporation of the highest credit rating can quality as a risk-free asset.b. A 5-year U.S. Treasury note would
Explain at least two important roles played by a safe asset in a financial market.
What is the controversy involving the existence of a safe asset?
Explain why you agree or disagree with the following statement: The riskless interest rate is the real short-term interest rate that would prevail if there were no transitory financial disturbances.
Suppose today that you have the following information: yield on 10-year TIPs: 0.58% yield on 10-year Treasury note: 2.31% What is the expected annual rate of inflation over the next 10 years?
Why is it difficult to measure an economy’s real rate of interest?
According to Fisher’s law, what is the relationship between the real rate and the nominal rate?
What is meant by the “real rate” of interest?
According to the liquidity-preference theory by Keynes, the level of interest rates is a purely a “monetary phenomenon.” What does that mean?
How does the loanable funds theory expand Fisher’s theory of interest rate determination?
What did Böhm-Bawerk mean by “roundaboutness” in his theory as to why interest rates must be positive?
Explain what is meant by “impatience” in the theory of interest rates.
Suppose a bond is purchased with a settlement date of October 15 and the next coupon payment is on December 1. The par amount purchased on the bond is $100,000, and its annual coupon rate is 4% paid
Suppose the following information is quoted for a hypothetical Treasury security:a. What is the bid price per $100 of par value?b. If an investor wanted to purchase $100,000 of par value of this
Someone tells you that a security is trading at 94.08. Why might you be confused by this quote?
What is the maximum price of a bond, assuming interest rates are not negative?
“Equity investors are in a better position to influence the carbon emission policy of corporations and governments than bond investors.” Explain whether you agree or disagree with this statement.
Export Development Canada issued a bond on March 17, 2009. The terms were as follows:a. What is meant by JPY LIBORBBA?b. Describe the coupon interest characteristics of this bond.c. What are the
What does the put provision for a bond entitle the bondholder to do?
What does the call provision for a bond entitle the issuer to do?
Suppose that the coupon reset formula for a floating-rate bond is 1-month LIBOR + 220 basis points.a. What is the reference rate?b. What is the quoted margin?c. Suppose on a coupon reset date that

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