assessment 2 -2

Questions and Answers

Eurosterling are

A. The sterling deposited in the Euro zone.

B. The sterling traded in USA.

C. The sterling in UK

D. The sterling deposited outside UK. (correct)

In one of leading banks in Sri Lanka received a Yen deposit. The technical terminology to recognize this deposit is,

A. Eurousd

B. Eurosterling

C. Euroyen (correct)

D.Eurorupee

Coupon rate of the bond is 5% and the required yield expected by the market from the particular bond is 4.5%. this bond is

A. A par bond.

B. Discounted bond.

C. Premium bond. (correct)

D. Cannot recognize as data is not adequate.

The coupon rate of a 3-year bond is 5%, its yield is also 5%. This bond is recognized as a.

A. Par bond. Signup and view all the answers

The coupon rate of an 8-year bond is 6% while its current market yield is 5.6%. Its current market value can be,

B. GBP 101.75 Signup and view all the answers

The coupon rate of a 10-year bond is 4.5% while its current market yield is 5.6%. Its current market value can be,

C. GBP 98.12 Signup and view all the answers

The current market value of a particular bond is at USD 100.00. Its yield is 4.6%. Which of the following can be its coupon rate.

C. 4.6% Signup and view all the answers

The current market value of a particular bond is at USD 102.75. Its yield is 4.6%. Which of the following can be its coupon rate.

B. 5.2% Signup and view all the answers

Which of the following is an advantage to the issuer of a convertible bond.

A. Borrowing cost is relatively lower. Signup and view all the answers

Which of the following is an advantage to the investor of a convertible bond.

C. Ability to get the advantage of rising share prices of the issuer. Signup and view all the answers

Study Notes

Eurosterling

Represents British pound-denominated deposits and loans made outside the UK financial system.

Yen Deposit Recognition

A deposit received in Yen by banks is referred to as a "Yen deposit."

Bond Yield and Coupon Rate Relationships

A bond with a coupon rate of 5% and a required market yield of 4.5% is classified as a "premium bond" since it pays more than the market demands.
A bond with a coupon rate of 5% and a yield of 5% is considered a "par bond," indicating its market value equals its face value.
A bond featuring a coupon rate of 6% and a market yield of 5.6% can be estimated to have a market value greater than its face value due to its higher coupon rate.
A bond with a coupon rate of 4.5% and a market yield of 5.6% has a market value below its face value, often defined as a "discount bond."

Current Market Value and Yield Calculation

A bond with a current market value of USD 100.00 and a yield of 4.6% indicates a coupon rate likely around 4.6%, as it is valued at par.
A bond valued at USD 102.75 with a yield of 4.6% suggests a coupon rate higher than 4.6%.

Convertible Bonds

Issuers of convertible bonds benefit from lower interest rates and flexible financing options.
Investors in convertible bonds gain potential appreciation through conversion into equity, offering downside protection with the bond's fixed income.