Fixed Income - Fixed Income Section 1
- Option : B
- Explanation : Money market securities are issued with a maturity at issuance (original maturity) ranging from overnight to one year. A is incorrect because securitization does not relate to a bond’s maturity, but to the process that transforms private transactions between borrowers and lenders into securities traded in public markets. C is incorrect because capital market securities are issued with an original maturity longer than one year.
- Option : C
- Explanation : The interest rate risk does not differ for Eurobonds, foreign bonds, or domestic bonds. Thus, this is not an advantage.
- Option : A
- Explanation : The currency denomination of a bond’s cash flows influences which country’s interest rates affect a bond’s price. The price of a bond issued by an American company and denominated in Singaporean dollars will be affected by Singapore’s interest rates.
- Option : B
- Explanation : Eurobonds are issued internationally, outside the jurisdiction of any single country. Foreign bonds are issued in a specific country, in the currency of that country, by an issuer domiciled in another country.
- Option : B
- Explanation : The borrowing periods corresponding to LIBOR range from overnight to one year.
