Some Bond Q's

[TraderGod]

1. Which of the following is the primary concern of a rating agency when rating the foreign currency debt of a sovereign nation?
A) Political stability and the extent of the participation of the populace in the political process.
B) Income base and growth of the economic infrastructure.
C) The country’s balance of payments and its ability to generate the appropriate foreign currency cash flows.
D) The government debt burden and debt service experience.
2. Which of the following most accurately explains the “break-even-rate” interpretation of forward rates? The forward rate is the rate that will make an investor indifferent between investing:
A) now or at a forward time.
B) for the full investment horizon, or for part of it, and then rolling over the proceeds for the balance of the investment horizon at the forward rate.
C) investing at the spot or forward interest rate.
D) for the full investment horizon or for part of it.
3. Which of the following is least likely a factor used in assessing the credit quality of a national government’s local currency debt?
A) Income and economic structure.
B) Fiscal policy and budgetary flexibility.
C) Balance of payments and structure of the external balance sheet.
D) Monetary policy and inflation pressures.
T/G

 

[Aimee]

A
B
D

 

[dinesh.sundrani]

Q1. C (EDIT)
Q2. B
Q3. C

 

[lola]

C
B
C

 

[bannisja]

C, B, C

 

[McLeod81]

C
B
D

 

[Niblita75]

A
B
C

 

[sweetheart1007]

C
B
C

 

[3_letters]

C
B
C

 

[TraderGod]

1. C was correct!
The key to the evaluation of the foreign currency debt of the nation is the country’s balance of payments and its ability to generate the appropriate foreign currency cash flows.
2. B was correct!
The pure expectations theory can be explained using a “break-even rate” line of reasoning. The break even rate is the forward rate that leaves investors indifferent between investing for the full term of their investment horizon or investing in part of the horizon and rolling the investment over at the “break-even” forward rate for the remainder of the term.
3. C was correct!
In assessing the credit quality of local currency debt, only domestic government policies that emphasize fostering or impeding timely debt service are considered. Only for foreign currency debt will credit analysis focus on the interaction of domestic and foreign government policies as measured by a country’s balance of payments and the structure of its external balance sheet.
T/G

 

[Black Swan]

CBC

 

[Black Swan]

you guys were quick on this one

 

[mwvt9]

Cool. I had CBC also.

 

[heeralm]

CBC …its so obvious