Question 1

What is the credit spread on a corporate bond?

Options :

A : The increased size of the bid/ask spread in a trade price

B : The difference in price between a corporate bond and a benchmark treasury

C : The additional yield required by investors to offset the credit risk of the security

D : The difference between the coupon rate of a corporate bond and the dividend of the issuing company

Answer: C

Question 2

The process by which a central clearing corporation manages its credit risk is known as:?

Options :

A : Margining

B : Matching

C : Migrating

D : Maturing

Answer: A

Question 3

An EUR-denominated Eurobond matures on 15 January 2017 and pays an annual coupon of 5% on an act/act basis. The bond is trading at a yield to maturity of 6% for settlement on 10 March 2015. Which of the following ststements is true of its clean price?

Options :

A : Its price will be above 100

B : Its price will be below 100

C : Its price will be 100

D : Need more information

Answer: B

Question 4

Which of the following investments would be an example of a pooled investment?

Options :

A : Deposit made with a bank

B : Purchase of shares

C : Purchase of a mutual fund

D : Purchase of an equity warrant

Answer: C

Question 5

Which of the following methods of raising funds will not be used by governments?

Options :

A : Direct borrowing from banks

B : Issuing bonds

C : Issuing short-term debt

D : Issuing equity

Answer: D

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