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

Main trading markets of Eurobonds are London and Luxembourg. Most Eurobonds are traded over-the-counter but some are listed on exchanges located in London, Luxembourg, and Dublin. However, there is not much of a secondary market for Eurobonds; most secondary trading occurs with dealers rather than other investors.

As compared to unsecured bonds, mortgage bonds are considered as less risky. Unsecured bonds or debentures are bonds that are not backed by some type of collateral. In other words, the bond is only secured by the bond issuer's good credit standing. There are no building, equipment, vehicles, or other assets backing up the bond. 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.

Conversion Price = Conversion rate received on conversion × Current market price of common stock
= $225 × $12 = $2,700.

Denomination currency choice and volatility of interest rates affects cost of euro bond. A Eurobond is a debt instrument that's denominated in a currency other than the home currency of the country or market in which it is issued. Eurobonds are important because they help organizations raise capital while having the flexibility to issue them in another currency.

Rate of return on convertible bond = Value of conversion option to bond holder - Rate of return on non-convertible bond
= $740 - $540 = $200.

Issuance of securities in which investment bank does not guarantee back up price and act as distributor in planning of issue is considered as best efforts offering. The term "issue" also refers to a series of stocks or bonds that have been offered to the public and typically relates to the set of instruments that were released under one offering.

Conversion values is divided by conversion rate received on conversion on stock to calculate current market price. The current price, also known as the market value, is the price at which goods are currently being sold in the market.

Firms that attach bonds to stock warrants are usually more risky. Warrants are a derivative that give the right, but not the obligation, to buy or sell a security most commonly an equity at a certain price before expiration.