International Finance and Treasury MCQ Questions and Solutions with Explanations | Management

Bonds that are not pledged against revenue stream or specific assets are classified as general obligation bonds. A general obligation bond (GO) is a municipal bond backed by the credit and taxing power of the issuing jurisdiction rather than the revenue from a given project. General obligation bonds are issued with the belief that a municipality will be able to repay its debt obligation through taxation or revenue from projects.

Markets in which bonds are traded and issued are classified as bond markets. The bond market—often called the debt market or credit market is a financial marketplace where investors can trade in government-issued and corporate-issued debt securities.

Conversion Price = Conversion rate received on conversion × Current market price = $410 × $18 = $7,380.

Sum of purchase price and accrued interest on treasury bonds and notes is considered as dirty price. A dirty price is a bond pricing quote, which refers to the cost of a bond that includes accrued interest based on the coupon rate.

Type of bonds that are swapped to less developed country against an outstanding loan are classified as Brady bonds. Brady bonds are bonds that are issued by the governments of developing countries. Brady bonds are some of the most liquid emerging market securities.

According to best efforts offering, investment bank in return of providing services must receive fee. An investment bank (IB) is a financial intermediary that performs a variety of services. Most Investment banks specialize in large and complex financial transactions, such as underwriting, acting as an intermediary between a securities issuer and the investing public, facilitating mergers and other corporate reorganizations and acting as a broker or financial adviser for institutional clients.

Requirement of certain amount of issued bond that must be retired every year is classified as sinking fund provision. A provision in some bond indentures requiring the issuer to put money aside to repay bondholders at maturity. In bonds with such a provision, a fund or account is set up into which an issuer deposits money on a regular basis to repay the bond when it matures.

In capital markets, instruments which are traded having maturity of more than one year is classified as bonds and mortgages. 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.

Debt which depict historical accumulated record of federal government expenditures is classified as national debt. The national debt is the public and intragovernmental debt owed by the federal government. It's also called sovereign debt, country debt, or government debt. It consists of two types of debt. The first is debt held by the public.

In financial markets, STRIPS are also classified as treasury zero coupon bonds. A zero-coupon bond is a debt security that does not pay interest but instead trades at a deep discount, rendering a profit at maturity, when the bond is redeemed for its full face value.