Question

Indicate whether the statement is TRUE or FALSE. 1. Eurobonds are dollar denominated bonds issued in the United States by a US Corporation. 2. Federal funds are generally short-term unsecured loans while repurchase agreements are shortterm secured loans. 3. An investor providing direct financing requires a financial intermediary to facilitate the transaction. 4. Bond markets and stock markets are examples of capital markets as these markets are involved in the trading of short and long-term securities. 5. Bonds issued with call provisions give the bondholder the opportunity to purchase common stock at a prespecified price up to a specified date. 6. A par value bond is a bond that trades at a value equal to its face value

Answer 1

1) FALSE

A Eurobonds is a bond that is issued in other currency then the country in which that bond is issued. So a Dollar denominated bond issued by a US corporation in any other country then US will be a Eurobonds. So the statement is false as becuase it is saying that bond is issued in US only.

2) TRUE

A federal funds are generally Short term in nature providing a quick liquidity in the market. It is also given on short or no security sokmetimes and so it is considered as Unsecured loans.

3) TRUE

A financial intermediary sometimes do act as a facilitator between 2 parties. However it cannot accept eposit from individual but it can as as an intermediary.

4) TRUE

A bond markets and stock markets are examples of capital market.

5) TRUE.

Call option gives us the option to buy or leave. Hence a callable bond gives the oppurtunity to purchase common stock at prespeceifed price up to a specefied date.

6) TRUE

A par value bonds means that is gives the same return what market is also giving and hence it will have always its face value.