1.Which of the following embedded options benefits the bond investor?

A)   Call provision.

B)   Put provision.

C)   Prepayment option.

D)   Accelerated sinking fund provision.

2.Which of the following embedded options most likely benefits the bondholder?

A)   Interest rate cap on a floating-rate bond.

B)   Accelerated sinking fund provision.

C)   Put provision at par on a bond that is trading at a premium.

D)   Prepayment option on an amortizing security.

答案和详解如下：

1.Which of the following embedded options benefits the bond investor?

A)   Call provision.

B)   Put provision.

C)   Prepayment option.

D)   Accelerated sinking fund provision.

The correct answer was B)

A put provision allows the investor to put the bond back to the issuer.

2.Which of the following embedded options most likely benefits the bondholder?

A)   Interest rate cap on a floating-rate bond.

B)   Accelerated sinking fund provision.

C)   Put provision at par on a bond that is trading at a premium.

D)   Prepayment option on an amortizing security.

The correct answer was C)

A put provision is an option that is exercisable by, and therefore potentially of benefit to, the bondholder. Even though the put is out of the money, it still has value to the bondholder. Interest rate caps, accelerated sinking fund provisions, and prepayment options all potentially benefit the issuer of the bond.