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Securities > Asset Classes - Debt types & features > Flashcards

Asset Classes - Debt types & features Flashcards

1
Q

What is a method of raising mezzanine debt?

A

Issuing payment in kind notes

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2
Q

Index-linked gilts

A

Both the coupon and the redemption value are index-linked

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3
Q

When creating an asset-backed security, to keep the instrument off-balance sheet, which of the following is used?

A

SPV

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4
Q

What is the order of priority in a winding-up?

A

Debentures. Guaranteed bond. Subordinated loan stock. Ordinary shares.

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5
Q

Which pay interest semi-annually?

A

US Tbonds

JGBs

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6
Q

Who are municipal bonds best suited for?

A

US investors living in the issuing state

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7
Q

Credit enhancements are

A

tools used by an issuer to enable bonds to be more highly-rated.

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8
Q

Which of the following is the most common form of security for debentures?

A

Fixed charge over property.

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9
Q

Which of the following asset classes can be broken into tranches offering different levels of risk and return?

A

Mortgage-backed securities

Collateralised debt obligations.

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10
Q

What does the term mezzanine capital refer to?

A

Unsecured high-yield debt that represents a claim on a company’s assets.

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11
Q

When a government bond is stripped

A

the income streams are treated as separate securities

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12
Q

In relation to the international government bond market

A

Bobls are German bonds paying annual coupons

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13
Q

Which of the following corporate debt securities is secured against a particular asset of a company?

A

Fixed charge

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14
Q

Which of the following is least likely about bonds

A

Prices are typically quoted dirty

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15
Q

Inters rates on index-linked gilts are linked to

A

Retail price index

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16
Q

If the credit rating on a corporate bond is upgraded

A

coupon will remain the same and the prices will rise

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17
Q

Bonds issued by US Treasury

A

coupons are paid semi-annually

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18
Q

Asian Development Bank

A

would issues supranational bonds

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19
Q

CCC

A

represents the credit rating of a non-investment grand bond

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20
Q

The different yields between conventional and index-linked gilts may be viewed as reflecting

A

long-term inflation rates

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21
Q

Schatz

A

life of less than 5 years when issued

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22
Q

Patrick observes that the effective price per share from a convertible bond is lower than the current market price of the underlying shares. how can he profit from this observation?

A

Buy the convertible and sell the underlying shares.

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23
Q

Zero-dividend preference shares

A

are paid out first on a liquidation

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24
Q

Stripped government bonds

A

Zero coupon

Tradable

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25
Q

Payment in kind notes are issued with

A

Mezzanine debt

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26
Q

CREST

A

is not permitted to strip a gilt

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27
Q

German bunds settle

A

T+2

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28
Q

Bearer document

A

sterling ond issued in the US, China and throughout the Eurozone

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29
Q

A company could issue bonds in order to satisfy the needs of investors that wish to invest in it, with the coupon rate and maturity set according to market demand. This is an example of

A

Medium term notes

30
Q

Bobls

A

Issued by the German government

Maturity of 5 years.

31
Q

Where a bond issuer has set aside a certain amount each year to buy back a certain number of bonds which are deemed callable they would have set up a

A

Sinking fund

32
Q

French bonds settle

A

T+2

33
Q

US T Bonds settle

A

T+1

34
Q

JGB settle

A

T+1

35
Q

Medium-term notes generally have a life to maturity of

A

2-10 years.

36
Q

A guaranteed bond of a company is generally guaranteed by

A

a company in the same group

37
Q

Convertible bond

A

similar to purchasing a non-convertible bond and being long an American style stock option

38
Q

Convertible bond

A

may be in a different currency to the converted shares

39
Q

Convertible bond

A

acts an option to purchase shares in the issuing company at the discretion of the buyer

40
Q

JGB

A

paid semi annually

41
Q

JGB

A

repayable on specific date
common maturity of 10 years
either register or bearer

42
Q

French OAT

A

pays annual coupon

43
Q

Bobls have a life of

A

3-5 years

44
Q

German government bonds

A

Bund and Bobl

45
Q

10 year strippable government bond can be stripped into

A

21 individual strips

46
Q

Freddie Mac

A

Federal home loan mortgage corporation

47
Q

Effect on price of convertible loan stock if share prices fall

A

Price of convertible falls

48
Q

US local government bonds are also known as

A

municipal bonds

49
Q

Repo rate

A

derived from gilt sale and repurchase

50
Q

US Bonds

A

Registed

Not issued with a zero-couon

51
Q

Bobl

A

German govt bond with maturity of 3 and 5 years.

52
Q

BBB-

A

lowest S&P rating for investment grade debt

53
Q

Index linked government bonds

A

Pay a low coupon
Coupon varies with inflation
Range of maturities are available

54
Q

Eurobonds

A

Fixed coupon

Bearer form

55
Q

Vanilla convertible bond usually pays

A

fixed coupon

56
Q

Immobilisation

A

placement of bearer securities with a centralised depository

57
Q

JGB issued with a maturity of

A

10 years

58
Q

Mezanine debt

A

carries a greater degree of risk than subordinated debt

59
Q

A bond which has just defaulted on a coupon payment would be rated by S&P as

A

D

60
Q

During a period of zero inflation what is the impact on the coupon of an index-linked gilt?

A

The coupon will be unadjusted in that period

61
Q

In relation to seniority where would mezzanine debt be placed?

A

Above preference shares and below subordinated debt

62
Q

Why would a company prefer to issue a convertible bond rather than issue shares to finance a takeover?

A

To benefit from lower initial servicing costs

63
Q

Which of the following is not an issuer of mortgage-backed securities in the US?

A

Government Home Mortgage Corporation

64
Q

Holders of subordinated debt rank above which of the following instruments?

A

Preference shares

65
Q

According to the credit ratings agency Moody’s what credit rating would be issued to a bond in default?

A

C

66
Q

Which of the following best describes a mortgage-backed security?

A

Bonds created when a group pf mortgage loans are pooled together to be sold to investors.

67
Q

TRAX

A

system for reporting eurobond trades

68
Q

Clean price of a gilt means

A

excluding accrued interests

69
Q

What would a bond spread normally be described as?

A

Difference between the bond’s yield and the yield on a benchmark gilt

70
Q

The life of an OAT is typically

A

2-50 years

71
Q

JGB settle

A

T+1

72
Q

Which of the following might describe the difference between government expenditure and revenue?

A

The deficit

Securities (19 decks)

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