International Finance And Treasury - Study Mode

[#101] Value of conversion option to bond holder is $220 and rate of return on non-convertible bond is $350 then rate of return on convertible bond is
Correct Answer

(B) $130

Explanation

Solution: Rate of return on convertible bond = Rate of return on non-convertible bond - Value of conversion option to bond holder = $350 - $220 = $130.

[#102] Several maturities dates are involved in issued bonds if company earnings are classified as
Correct Answer

(C) volatile

Explanation

Solution: Several maturities dates are involved in issued bonds if company earnings are classified as volatile.

[#103] Municipal bonds public offering is often made through
Correct Answer

(C) commercial banking firm

Explanation

Solution: Municipal bonds public offering is often made through commercial banking firm. Commercial banks make loans to people and small businesses and offer checking and savings accounts and certificates of deposit.

[#104] Value of option issued to call debt is $780 and return rate on callable bond is $370 then return rate on non-callable bond is
Correct Answer

(D) $410

Explanation

Solution: Non-callable bond = Value of option issued to call debt - Return rate on callable bond = $780 - $370 = $410.

[#105] Besides equity related bonds, type of Eurobonds that are convertible are classified as
Correct Answer

(C) bonds with equity warrants

Explanation

Solution: Besides equity related bonds, type of Eurobonds that are convertible are classified as bonds with equity warrants. Equity warrant bonds are debt securities that incorporate warrants, which give the holder the option to purchase equity in the issuer, its parent company, or another company during a predetermined period or on one particular date at a fixed contract price.