Questions and Answers
What are Foreign Bonds and Eurobonds?
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?
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What is the definition of an equity-related bond?
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What is a convertible bond?
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What is a zero-coupon bond?
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What defines a dual-currency bond?
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Which market structures are included in the Eurobond market?
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What is the role of the lead manager?
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What is an underwriting syndicate?
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What does a managing group do?
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What is a market maker?
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The clearing procedure typically involves the __________ transfer of bonds.
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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
Equity-related Bond
- 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!
