TEST BANK
CAPITAL MARKETS: INSTITUTIONS AND INSTRUMENTS
FABOZZI/MODIGLIANI
Chapter 22
CORPORATE SENIOR INSTRUMENTS MARKETS: I
MULTIPLE CHOICE
1. Corporate senior instruments:
[M]
2. The market for corporate debt obligations include the:
[E]
3. An investor who lends funds to a corporation by purchasing its debt obligation is exposed
to:
[M]
4. The yield on a corporate debt instrument is made up of:
5. Standard & Poor’s Corporation, Moody’s Investors Services, and Fitch are companies in
[M]
6. A deterioration in the credit quality of a debt issue or the issuer that is rewarded with a
better credit rating is referred to as:
[M]
7. When assessing the credit risk of a corporate issuer rating agencies look at:
[M]
8. Corporate governance issues include:
[M]
9. In all rating systems the term high grade means:
10. A rating of Ba3 means that a bond is:
[M]
11. Loans made by offshore banks are referred to as:
[E]
12. A loan in which a group of banks provides funds to the borrower is known as a:
[E]
13. Loan structures in which no repayment of the principal is made until the maturity date are
referred to as:
[M]
14. Senior bank loans:
15. The reference rate on a syndicated loan is typically:
[M]
16. Syndicated loans are distributed by:
[M]
17. Leasing is a form of:
[E]
18. When the lessor uses only a portion of its own funds to purchase the equipment and
borrows the balance from a bank, the lease is referred to as a:
[M]
19. The market for lease financing is a segment of the larger market for:
20. That creditors are less informed about the true economic operating conditions of the firm
than is management is espoused in:
[M]
TRUE/FALSE
1. The part of the risk premium or spread attributable to credit risk is called the credit
spread.
[E]
2. A formal corporate bond-rating systems has existed in Japan since the 1940s.
[M]
3. In assessing the ability of an issuer to service its debt, analysts consider qualitative
factors in addition to financial ratios calculated from the financial statements of the
issuing corporation.
[E]
4. More strongly aligning the interests of management with those of shareholders can
mitigate the likelihood that management will act in its own self-interest.
[M]
5. Business risk analysis involves traditional ratio analysis and other factors affecting the
firm’s financing.
[M]
6. Bond issues assigned a rating in the top four categories are referred to as high-yield
bonds.
7. Chapter 11 bankruptcy deals with the liquidation of a company.
[M]
8. The banks in a syndicated loan have the right to sell their parts of the loan to other banks.
[M]
9. The absolute priority rule is the principle that guarantees the seniority of equity holders to
junior creditors.
[M]
10. Leasing is a way by which tax benefits can be transferred from the lessee to the lessor.
ESSAY QUESTIONS
1. Describe the different forms of credit risk.
Key Issues:
2. Compare and contrast a single-investor lease and a leveraged lease.
Key Issues:
3. Describe the basic terms of a loan agreement.
Key Issues: