Introduction to Debt Securities: Basic Definitions Quiz

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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?

Money Market Signup and view all the answers

What is the issue price of a bond?

The price at which the bond issuer originally sells the bonds Signup and view all the answers

What does the coupon rate of a bond represent?

Rate of interest the issuer pays on the face value 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?

Money Market Accounts Signup and view all the answers

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

Certificate of Deposit (CD) Signup and view all the answers

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

They are sold at a discount to their face value Signup and view all the answers

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

Banker's Acceptances Signup and view all the answers

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

Enabling short-term borrowing for dealers in government securities Signup and view all the answers

What is the main characteristic of debt securities?

They offer guaranteed repayment of principal Signup and view all the answers

What makes Commercial Paper different from other money market instruments?

It is an unsecured, short-term debt instrument issued by corporations Signup and view all the answers

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

Bonds Signup and view all the answers

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

Determining the coupon rate Signup and view all the answers

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

They offer a fixed stream of income Signup and view all the answers

What is the main purpose of investing in debt securities?

Means for diversification Signup and view all the answers

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

The principal amount must be repaid in full Signup and view all the answers