Introduction to Debt Securities: Basic Definitions Quiz
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Questions and Answers

What is the characteristic of a corporate bond?

  • Backed by real estate properties
  • Longer-term maturity (correct)
  • Locally issued
  • Short-term maturity

Which type of bonds consist of pooled mortgages on real estate properties?

  • Corporate Bonds
  • Emerging Market Bonds
  • Mortgage-Backed Bonds (MBS) (correct)
  • Municipal Bonds

What entices buyers to purchase government bonds?

  • Issue price
  • Face value payout (correct)
  • Coupon rate
  • Maturity date

In which market are very short-term debt products like overnight reserves traded?

<p>Money Market (C)</p> Signup and view all the answers

What is the issue price of a bond?

<p>The price at which the bond issuer originally sells the bonds (B)</p> Signup and view all the answers

What does the coupon rate of a bond represent?

<p>Rate of interest the issuer pays on the face value (D)</p> Signup and view all the answers

What type of money market investment offers limited rights to occasionally withdraw money or write checks against the account?

<p>Money Market Accounts (A)</p> Signup and view all the answers

Which money market instrument attracts a penalty for withdrawing prior to the maturity date?

<p>Certificate of Deposit (CD) (B)</p> Signup and view all the answers

What is the primary characteristic of Treasury Bills in the money market?

<p>They are sold at a discount to their face value (D)</p> Signup and view all the answers

Which money market instrument is extensively used in foreign trade financing?

<p>Banker's Acceptances (A)</p> Signup and view all the answers

What function does a Repurchase Agreement serve in the money market?

<p>Enabling short-term borrowing for dealers in government securities (A)</p> Signup and view all the answers

What is the main characteristic of debt securities?

<p>They offer guaranteed repayment of principal (D)</p> Signup and view all the answers

What makes Commercial Paper different from other money market instruments?

<p>It is an unsecured, short-term debt instrument issued by corporations (B)</p> Signup and view all the answers

Which financial instrument is the most common form of debt securities?

<p>Bonds (B)</p> Signup and view all the answers

What is the significance of the issue date and issue price for debt securities?

<p>Determining the coupon rate (D)</p> Signup and view all the answers

Why are debt securities generally regarded as holding less risk for investors?

<p>They offer a fixed stream of income (C)</p> Signup and view all the answers

What is the main purpose of investing in debt securities?

<p>Means for diversification (B)</p> Signup and view all the answers

In the context of debt securities, what happens at the maturity date?

<p>The principal amount must be repaid in full (B)</p> Signup and view all the answers

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