International Bond Market Chapter 12
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Questions and Answers

What are Foreign Bonds and Eurobonds?

  • Bearer bonds and registered bonds
  • National security registrations
  • Withholding taxes
  • All of the above (correct)

    • What are bearer bonds?

    Bonds with no registered owner that offer anonymity.

    What is a global bond?

    An international bond offering by a single borrower sold in multiple regions.

    Which of the following is NOT a type of instrument?

    <p>Investment fund</p> Signup and view all the answers

    What is the definition of an equity-related bond?

    <p>Bonds that can be converted into shares</p> Signup and view all the answers

    What is a convertible bond?

    <p>A bond that allows the investor to exchange it for a predetermined number of equity shares.</p> Signup and view all the answers

    What is a zero-coupon bond?

    <p>A bond sold at a discount and has no cash flow until maturity.</p> Signup and view all the answers

    What defines a dual-currency bond?

    <p>A bond with interest paid in one currency and principal in another.</p> Signup and view all the answers

    Which market structures are included in the Eurobond market?

    <p>All of the above</p> Signup and view all the answers

    What is the role of the lead manager?

    <p>The person in the underwriting syndicate that brings the bonds to market.</p> Signup and view all the answers

    What is an underwriting syndicate?

    <p>A group of banks that specialize in public bond issuance.</p> Signup and view all the answers

    What does a managing group do?

    <p>Helps negotiate terms, ascertain market conditions, and manage issuance.</p> Signup and view all the answers

    What is a market maker?

    <p>A person ready to buy or sell for their account by quoting bid and ask prices.</p> Signup and view all the answers

    The clearing procedure typically involves the __________ transfer of bonds.

    <p>physical</p> Signup and view all the answers

    Study Notes

    Foreign Bonds and Eurobonds

    • Foreign bonds can be bearer bonds or registered bonds and may involve national security registrations and withholding taxes.
    • Recent regulatory changes have impacted how global bonds are issued and maintained.

    Bearer Bond and Registered Bond

    • Bearer bonds do not have a registered owner, providing anonymity but with high risk of loss similar to cash.
    • Registered bonds have the owner's identity recorded, offering more security against loss.

    Global Bond

    • Defined as an international bond offering by a single borrower, sold simultaneously in North America, Europe, and Asia.

    Types of Instruments

    • Various types include:
      • Straight fixed-rate debt
      • Floating-rate notes
      • Equity-related bonds (convertible bonds and bonds with equity warrants)
      • Zero-coupon bonds
      • Dual-currency bonds
      • Composite currency bonds
    • Comprises convertible bonds and bonds equipped with equity warrants, linking investments directly to company equities.

    Convertible Bond

    • Allows investors to exchange the bond for a pre-defined number of equity shares of the issuer, adding potential upside linked to company performance.

    Bond with Equity Warrant

    • Provides the bondholder the right to purchase a specified number of shares at a predetermined price while retaining the bond.

    Zero-coupon Bond

    • Issued at a steep discount compared to face value, offering no cash flow until maturity, appealing to long-term investors.

    Dual-Currency Bond

    • A fixed-rate bond where interest payments are made in one currency and principal is repaid in another, facilitating cross-border investment.

    Eurobond Market Structure

    • Comprises a primary market for new issuances, a secondary market for trading existing bonds, and well-defined clearing procedures.

    Lead Manager

    • The entity or individual within the underwriting syndicate tasked with bringing the bonds to market, crucial for coordination and success.

    Underwriting Syndicate

    • A collaboration of various banks that specializes in different phases of a public bond issuance, pooling resources and expertise.

    Managing Group

    • This group negotiates terms with the borrower, assesses market conditions, and manages the overall issuance process, ensuring effective execution.

    Market Maker

    • An individual ready to buy or sell securities, providing liquidity in the market by quoting both bid and ask prices.

    Clearing Procedure

    • Involves efficient systems for transaction processing, where physical bond transfers are rare, enhancing speed and reliability in trade settlements.

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    Description

    Dive into the essentials of the International Bond Market with this quiz based on Chapter 12. Explore key concepts such as foreign bonds, Eurobonds, bearer bonds, and registered bonds, along with recent regulatory changes and withholding taxes. A must for finance enthusiasts!

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