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Question
The most common forms of external credit enhancements are:a. A corporate guarantee.
b. A bank letter of credit.
c. Bond insurance.
d. a and b only.
e. All of the above.
Answer
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Related questions
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If the shape of the yield curve is upward sloping and the cost of carry is positive, the futures price will trade at a:a. Discount to the cash price.b. Premium to the cash price.c. Be equal to the cash price.d. Cannot be determined.e. None of the above.
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Discuss the differences between covered bonds and residential mortgage-backed securities (RMBS), commercial mortgage-backed securities (CMBS), and other asset-backed securities (ABS).
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Outside of the U.S. inflation-indexed bonds are known as:a. TIPS.b. HICPS.c. Indexers.d. Linkers.e. None of the above.
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When making a direct comparison between the yield to maturity on a U.S. fixed-ratebond and a Eurodollar fixed rate bond:a. An adjustment must be made because Eurodollar bonds pay annually rather than semiannually.b. Given the yield on a Eurodollar fixed-rate bond, the bond-equivalent yield will always be lower.c. Given the yield on a U.S. fixed-rate bond, the yield to maturity on an annual basis is always less than the yield to maturity on a bond-equivalent basis.d. a and b only.e. a and c only.
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A dual-currency issue:a. Pays coupon interest in one currency and the principal in a second currency.b. Pays coupon interest in two different currencies.c. Pays the principal in two different currencies.d. Is one that is issued in a different currency than the one the investor pays with.e. None of the above.
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The coupon rate on a floating-rate note may be:a. LIBOR.b. A stated margin.c. The bid on LIBOR.d. A spread over LIBID.e. The arithmetic average of LIBOR and LIBID.
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An indirect quote is the:a. Number of units of foreign currency needed to acquire one unit of the local currency.b. Number of units of local currency needed to acquire one unit of the foreign currency.c. Reciprocal of a direct quote.d. a and c only.e. None of the above.
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In an interest rate swap, the position of the floating-rate payer is equivalent to a:a. Long position in a fixed-rate bond and a short position in a floating rate bond.b. Long position in a floating-rate bond and a short position in a fixed-rate bond.c. Long position in a fixed-rate bond and a long position in a floating rate bond.d. Short position in a fixed rate bond and a long position in a floating rate bond.e. None of the above.
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Institutional investors look for the mispricing of stock index futures to create arbitrage profits and thereby enhance portfolio returns. This strategy is referred to as:a. Dynamic hedging.b. Index arbitrage.c. Riskless arbitrage.d. Program trading.e. None of the above.
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