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

Eurobonds are denominated in only one currency which is Euros. Eurobonds are bonds denominated in a currency different from the currency of the countries in which they are issued and sold. The name Eurobond has nothing to do with euros or even with Europe.

Legal contract which states legal rights of seller and buyer is classified as bond indenture. The bond indenture (aka trust indenture, deed of trust) is a legal contract between the issuer and the trustee that specifies the scope and the responsibilities of the borrower, the trustee, and the lender, and the characteristics of the bond, such as the maturity date, coupon rate, and so on.

Eurobonds are traded in over counter market. Like stocks, after issuance in the primary market, bonds are traded between investors in the secondary market. However, unlike stocks, most bonds are not traded in the secondary market via exchanges. Rather, bonds are traded over the counter (OTC).

Face value of bond = Call premium of bond - Call price of bond
= $560 - $340 = $220.

In firm commitment underwriting procedure, more risk is at side of investment bank. 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.

Corporate bonds are also considered as registered bonds. A registered bond is a bond which has its owner registered with the bond's issuer. The owner's name and contact information is recorded and kept on file with the company, allowing it to pay the bond's coupon payment to the appropriate person.

Replacement of bearer bonds with registered bonds is because of lack of security of bearer bonds. Bearer bonds that are lost cannot be replaced as no records exist on the identity of the security owner.

Price of bonds = Call premium + Face value of bond
= $385 + $285 = $770.

With consolidation of currencies, created liquidity allows Eurobond demand and size to increase. A Eurobond is denominated in a currency other than the home currency of the country or market in which it is issued. These bonds are frequently grouped together by the currency in which they are denominated, such as eurodollar or Euroyen bonds.

Type of bonds issued by governments outside home country of issuer of bond are classified as foreign bonds. A foreign bond is a bond issued in a domestic market by a foreign entity in the domestic market's currency as a means of raising capital. For foreign firms doing a large amount of business in the domestic market, issuing foreign bonds, such as bulldog bonds, Matilda bonds, and samurai bonds, is a common practice.