Discuss CIMA CIMAPRA19-F03-1 Exam Topic 3 Question 97

Which THREE of the following statements are correct in respect of the issuance of debt securities.

AA bond issuer must appoint at least one market-maker to ensure that there is a liquid market in its traded bonds.

BThe redemption yield on a corporate bond can be determined by calculating the internal rate of return based on the cash flows arising during the duration of the bond.

CInvestors in traded bonds have an ownership (or equity stake) in the company which issued the bonds.

DA corporate entity coming to the bond market for the first time will find it easier to issue corporate bonds than to arrange a conventional term loan.

EGovernments are the most frequent issuers of bonds and the proceeds are used to fund government expenditure or service the national debt.

Suggested Answer: C, D, E

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30 comments · newest first

Leonora 11 months ago

B is correct; IRR is a solid way to find redemption yield.

Amalia 11 months ago

D seems a bit off. Isn’t it usually harder for newbies to issue bonds?

Meaghan 11 months ago

Wait, C is misleading. Bondholders don’t own a piece of the company!

Tyisha 12 months ago

Totally agree, E is spot on about governments issuing bonds!

Winfred 12 months ago

A bond issuer needs a market-maker for liquidity, that's true.

Christene 1 year ago

Governments issuing bonds to fund expenditures is definitely a common practice, but I wonder if there are exceptions for certain types of bonds.

Gearldine 1 year ago

I’m pretty sure that bondholders don’t have an ownership stake in the company, but I might be mixing that up with equity investors.

Melodie 1 year ago

The redemption yield calculation sounds familiar; I think it involves the internal rate of return based on cash flows, which makes sense for corporate bonds.

Wynell 1 year ago

I remember studying that bond issuers often need market-makers, but I'm not entirely sure if it's mandatory for all types of bonds.

Felix 1 year ago

Whew, this is a tricky one. There are a lot of details to keep track of when it comes to debt securities. I'll need to use my knowledge of financial markets to work through this systematically.

Lenna 1 year ago

Okay, let me take a closer look at this. Identifying the correct statements about debt securities issuance should be doable if I break it down step-by-step.

Corinne 1 year ago

Hmm, I'm a bit unsure about this one. The statements seem to cover a lot of different aspects of debt securities. I'll need to think through each one carefully to determine which ones are correct.

Vernice 1 year ago

This question seems straightforward, I think I can handle it. I'll carefully read through each statement and decide which ones are correct.

Kaycee 2 years ago

This is a pretty straightforward debt securities question. I think B, E, and probably A are the correct answers.

Joana 2 years ago

↳ replying to Kaycee

I'm not sure about A, but I think it makes sense that a bond issuer would appoint a market-maker for liquidity.

Alyce 2 years ago

↳ replying to Kaycee

I agree, E is also correct. Governments often issue bonds to fund their expenses.

Kristeen 2 years ago

↳ replying to Kaycee

I think B is definitely correct. The redemption yield is important in determining the value of a bond.

Xenia 2 years ago

I believe statement D is incorrect. It may actually be easier for a new corporate entity to arrange a term loan rather than issue corporate bonds.

Nada 2 years ago

I agree with Felicitas. Statement E is also correct as governments frequently issue bonds to fund their expenditures.

Felicitas 2 years ago

I think statement B is correct because the redemption yield can be calculated based on cash flows.

Mabelle 2 years ago

A seems plausible, but I'm not 100% sure about the requirement for a market-maker. Gotta double-check that one.

Quentin 2 years ago

Haha, D is a bit suspect. I doubt a company would find it easier to issue bonds than get a term loan, especially if it's their first time in the bond market.

Madalyn 2 years ago

C is definitely wrong. Investors in bonds don't have any ownership stake in the company. That's just basic bond knowledge.

Alex 2 years ago

B and E are definitely correct. Determining redemption yield and government as the most frequent issuers of bonds are key points about debt securities.

Marcelle 2 years ago

↳ replying to Alex

That's true, market-makers are not always necessary for bond liquidity.

Teddy 2 years ago

↳ replying to Alex

I think A is incorrect because market-makers are not always required for bond issuance.

Alishia 2 years ago

↳ replying to Alex

Yes, calculating redemption yield and government issuers are important.

Ling 2 years ago

↳ replying to Alex

B and E are definitely correct.

Glendora 2 years ago

↳ replying to Alex

User 2

Heike 2 years ago

↳ replying to Alex

User 1

CIMAPRA19-F03-1 Exam - Topic 3 Question 97 Discussion