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

Actual exam question for CIMA's CIMAPRA19-F03-1 exam

Question #: 97
Topic #: 3

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.

Show Suggested Answer

Suggested Answer: C, D, E

by Hildred at Sep 17, 2024, 03:53 PM

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Leonora

3 months ago

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

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Amalia

3 months ago

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

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Meaghan

3 months ago

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

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Tyisha

4 months ago

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

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Winfred

4 months ago

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

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Christene

4 months ago

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

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Gearldine

4 months 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.

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Melodie

4 months 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.

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Wynell

5 months 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.

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Felix

5 months 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.

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Lenna

5 months 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.

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Corinne

5 months 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.

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Vernice

5 months ago

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

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Kaycee

1 year ago

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

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Joana

1 year ago

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

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Alyce

1 year ago

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

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Kristeen

1 year ago

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

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Xenia

1 year 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.

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Nada

1 year ago

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

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Felicitas

1 year ago

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

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Mabelle

1 year ago

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

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Quentin

1 year 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.

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Madalyn

1 year ago

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

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Alex

1 year 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.

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