International Finance And Treasury - Study Mode

[#106] If price of municipal bonds suddenly changes because of an unexpected interest rate change then investment bank
Correct Answer

(B) faces a loss

Explanation

Solution: If price of municipal bonds suddenly changes because of an unexpected interest rate change then investment bank faces a loss. Municipal bonds are loans investors make to local governments. They are issued by cities, states, counties, or other local governments. For that reason, the interest they pay on the bonds is tax-free.

[#107] Financial firms such as mutual fund and insurance companies are also called
Correct Answer

(D) business financial

Explanation

Solution: Financial firms such as mutual fund and insurance companies are also called business financial. Business Finance means the funds and credit employed in the business. Finance is the foundation of a business.

[#108] Municipal bonds are more considerable to
Correct Answer

(B) household investors

Explanation

Solution: Municipal bonds are more considerable too household investors. Municipal bonds are loans investors make to local governments. They are issued by cities, states, counties, or other local governments. For that reason, the interest they pay on the bonds is tax-free.

[#109] Bonds used in purpose of specific projects which are financed by collateral for issuing bonds are classified as
Correct Answer

(D) mortgage bonds

Explanation

Solution: Bonds used in purpose of specific projects which are financed by collateral for issuing bonds are classified as mortgage bonds. A mortgage bond is a bond secured by a mortgage or pool of mortgages. These bonds are typically backed by real estate holdings and real property such as equipment. In a default situation, mortgage bondholders have a claim to the underlying property and could sell it off to compensate for the default.

[#110] The price at which a market maker is prepared to buy a currency or borrow money is termed as
Correct Answer

(B) bid rate

Explanation

Solution: The price at which a market maker is prepared to buy a currency or borrow money is termed as bid rate. The bid rate is thus the rate at which the dealer is willing to buy the base currency and the ask rate is the one at which the dealer is willing to sell the base currency. The difference between the ask rate and the bid rate is called the bid-ask spread and is the profit of the dealer.