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The Bank of Canada announced the auction of $10 bi...




The Bank of Canada announced the auction of $10 billion of 3-month T-bills on October 28, 2009. The auction results were released after the auction. The lowest yield was 5.25% and the highest yield was 5.3%. The non-competitive tenders amounted to $66,594,000 with all of these accepted. The total amount of competitive bids tendered was $16,215,097,000, with $9,934,570,000 accepted. 36. What was the stop (cut-off) yield? ____ A) 5.300% B) 5.275% C) 5.250% D) Undetermined 10 37. What was the bid-to-cover ratio? ___ A) 1.639 B) 2.045 C) 1.993 D) 1.628 38. Which of the following is true regarding Treasury bills? ____ A) The market for Treasury bills is extremely thin and illiquid B) Occasionally, investors find that earnings on T-bills do not compensate them for changes in purchasing power due to inflation C) By volume, most Treasury bills are sold to individuals who submit non-competitive bids D) All of the above 39. The most influential participant(s) in the Canadian money markets is (are) ____ A) Investment banks that underwrite securities B) Banks and deposit-taking institutions C) Corporations D) Bank of Canada 40. Which of the following is false regarding banker?s acceptance (BA)? ____ A) They can be bought and sold until they mature B) They are relatively new money market securities that arose in the 1960s as international trade expanded C) They are orders to pay a specified amount of money to the bearer on a given date D) They carry low interest rates because of the very low default risk E) None of the above 41. Governments never issue stock because ____ A) They cannot sell ownership claims B) The constitution expressly forbids such an issuance C) Both (A) and (B) D) Neither (A) nor (B) 42. Which of the following is true? ____ A) The best known capital market securities are stocks and bonds B) Securities having an original maturity that is greater than one year are traded in capital markets C) Firms and individuals use the capital markets for long-term investments D) All of the above 11 43. The over-the-counter (OTC) market in corporate shares ____ A) Is the dominant market for these securities B) Is restricted to the shares of only a few firms C) Is the third market in corporate shares D) Is based in Toronto and Montreal only E) Includes national trading in some shares and trading among local investors in others 44. Which of the following is true regarding Canada real return bonds? ____ A) The principal amount used to compute the interest payment varies with the consumer price index (CPI) B) The interest payment rises when inflation occurs C) At maturity the securities pay the greater of face-value or inflation-adjusted principal D) All of the above E) None of the above 45. Most of the time, the interest rate on Canada bonds is ____ that on money market securities because of ____ risk. ____ A) Above; interest rate B) Above; default C) Below; interest rate D) Below; default 46. Bonds with a 10% coupon rate will trade at the following price when the appropriate market interest rates are 10%. ____ A) 105 B) 100 C) 95 D) Insufficient information 47. The market price is $1,130 for a 10% non-callable corporate bond with a par value of $1,000 and 14 years to maturity. It pays interest semi-annually. The required rate of return on similar bonds is presently 8.4%. How much accrued interest would have to be paid if you purchased the bond on February 8, 2010, if the bond matures on June 30, 2024? ____ A) $5.34 B) $10.41 C) $10.68 D) Insufficient information Hint: Accrued interest = Par amount ? Coupon rate ? (Timer period/365) 12 48. A bond that is issued by a Japanese company in Canada that is denominated in U.S. dollars is an example of a ____ A) Domestic bond B) Foreign bond C) Eurobond D) Maple bond 49. To sell an old bond when interest rates have ____, the holder will have to ____ the bond until the yield to the buyer is the same as the market rate. ____ A) Fallen; discount B) Fallen; inflate C) Risen; discount D) Risen; inflate 50. Blue-chip bonds ____ A) Are considered highly risky by rating agencies such as Standard and Poor B) Pay higher rates of interest than those bonds that are considered less than blue-chips C) Are government bonds D) Go in and out of vogue with surges in corporate takeovers E) None of the above (The following information relates to Questions 51 and 52) Assume that a $500 million pool of mortgages backs a new MBS issue. The projected prepayment speed is 140% PSA. 51. What is the single monthly mortality (SMM) rate for the first month? ____ A) 0.01668% B) 0.02243% C) 0.02336% D) 0.02535% Hint: For months 1 ? t ? 30 based on 100% PSA, SMM = 1 ? (1 - 0.2% ? t)(1/12) 52. If the estimated prepayment for the first month will be $116,776.64, what is the scheduled principal repayment for this period? _____ A) $100,000 B) $150,000 C) $200,000 D) Undetermined 13 53. An individual needs a mortgage loan of $190,000 while he has put up a 25% down payment. How much is the purchase price of the property? ____ A) $275,000 B) $142,500 C) $253,300 D) $237,500 54. Canadian law requires interest on fixed-rate mortgages to be compounded semi-annually. With an effective annual rate of 11.30%, what is the posted rate? ____ A) 10.54% B) 11.00% C) 11.62% D) Undetermined


Paper#7023 | Written in 18-Jul-2015

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