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TUTORIAL FOR CHAPTER 10: BOND MARKET
Theoretical Questions (chapter 12):
1. Capital security exchange made up of computer networks.
2. STRIPS
3. Issued by business, usually unsecured, not more than 270 days maturity.
4. You sell securities with the obligation to buy it at agreed day in future.
5. Municipal bonds backed by the full faith and credit of the issuer;
6. Bonds rated below the investment grade.
7. Bank issued short-term security, usually sold in large denominations; maturity is fixed.
8. Municipal bonds backed only by cash flows from the project.
9. Financial Institutions that aggregate money from a group of small investors and invest it
in money market instruments.
10. Bonds issued by the certain agencies of the US government.
11. Bonds adjusted for inflation.
12. The contract that states the lender’s rights and borrower’s obligations.
13. The conditions under which the issuer has a right to force the holder to sell the bond
back.
14. A requirement in the bond indenture that the firm pay off a portion of the bond each year.
15. Long term unsecured bonds backed by the borrower’s creditworthiness.
16. Rules and restrictions on managers designed to protect the bondholder’s interest.
Answers:
1. Over-the-counter exchanges
2. Separate Trading of Registered Interest and Principal Securities
3. Commercial Papers
4. Repurchase agreement (REPO)
