CIMA Exam CIMAPRA19-F03-1 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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Kaycee

9 months 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

8 months 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

9 months ago

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

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Kristeen

9 months ago

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

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Xenia

9 months 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

9 months ago

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

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Felicitas

9 months ago

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

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Mabelle

9 months 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

9 months 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

9 months 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

9 months 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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