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CISI Level 3 Introduction to Investment – Bonds Exam Questions and Answers
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CISI Level 3 Introduction to Investment – Bonds Exam Questions and Answers
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CISI Level 3 Introduction to Investment –Bonds Exam Questions and Answers
Bonds are commonly referred to as - Answer -loan stock, debt or fixed interest
securities
Nominal is - Answer -the amount of stock purchased
UK government bonds are known as - Answer -gilts or gilt-edged stock
There are 2 types of government bonds in issue: - Answer -1. conventional
2. index-linked
What is a conventional bond? - Answer -A conventional bond has a fixed coupon and
single repayment date
What is an index linked bond? - Answer -An index linked bond is a bond that has its
coupon payments AND redemption amount adjusted for inflation
When are index linked bonds attractive? - Answer -When a governments control of
inflation is uncertain because they provide protection to the investor
What does it mean to 'strip' a gilt? - Answer -It is broken down into its individual cash
flows which can be traded separately as zero coupon gilts. These are known as gilt
STRIPS
What is a corporate bond? - Answer -A bond which is issued by the company
Conventional bonds represent what percentage of bonds in issue? - Answer -75%
What is the difference between a corporate bond and commercial paper? - Answer -A
commercial paper is a short term debt instrument whereas corporate bonds have a
maturity date of more than 12 months
Most corporate bonds are listed on - Answer -exchanges
Trading of corporate bonds commonly occurs - Answer -OTC - directly between
counterparties
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