CSC Chapter 6 Questions and Answers
What is a direct bond?
When bonds are issued directly by the Government itself
What is a guaranteed bond?
Bonds are issued by a crown corporation, but if the issuer goes default, the Government pays the interest & principal payment
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CSC Chapter 6 Questions and Answers
What is a direct bond? - answer When bonds are issued directly by the Government
itself
What is a guaranteed bond? - answer Bonds are issued by a crown corporation, but
if the issuer goes default, the Government pays the interest & principal payment
Bonds trading at a discount - answer When yield is > coupon rate
Bonds trading at a premium - answer When yield is < coupon rate
When are interest paid on a bond? - answer Semi-annually
What are liquid bonds? - answer Bonds are traded in a significant volume. It allows
for a large volume to be trade quickly without making a significiant sacrifice on the price
What is a marketable bond? - answer There is a ready market for the bond. These
bonds have features & price that are attractive
What is a callable bond? - answer Issuers can call (redeem) the bond. They will
payoff the bond before maturity. The issuer must give 10-30 days notice. Corporation &
Provincial Government bonds are callable, while Federal & Municipal Government
bonds are non-callable
What is a Canada Yield Call? - answer Allows issuers to call the bond at a price
based on the yield of a Government bond + yield spread
When are bonds settled? - answer Settled on or 3 days business date
What are strip bonds? - answer High quality bonds where some or all coupon are
separated. The principal & any coupons left are traded separately at a discount.
What is an extendible bond? - answer Bonds are usually issued a short-term
maturity, but has the option to exchange for an identical amount of a long-term bond
with or higher coupon
What is a retractable bond? - answer Bonds issued with a long-term maturity that
has an option to redeem at by par by the retraction date
What is a sinking fund? - answer Corporation bonds have a mandatory call feature
for a sinking fund purpose. Its a sum of money set aside out of earning for repayment of
all or part of debt securities at maturity
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