Fixed Income【Session9- Reading 24】习题精选 2012

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Which of the following best describes the basis for relative-value analysis?

A) Generates rankings of expected returns.

B) Identifies mispricings.

C) Identifies the value of corporate bonds relative to government bonds.

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Relative value refers to the ranking of fixed-income investments by sectors, structures, issuers, and issues in terms of their expected performance during some future interval.

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Which of the following is the major emphasis of the bottom-up approach of classic relative-value analysis? Identifying:

A) individual issues that are expected to outperform their peer groups.

B) high-convexity issues.

C) optimal allocations to individual issuers.

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Bottom-up approaches focus on security by security analyses in the attempt to find those individual issues expected to outperform others.

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In the bond market, relative-value analysis refers to the:

A) relative market value of each holding to the total value of the portfolio.

B) methodologies employed to generate rankings of fixed income securities according to various attributes such as sectors and expected performance.

C) relative risk and return characteristics between a corporations’ common stock and its debt issues.

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Relative-value analysis refers to several related methodologies used to rate and rank fixed-income securities.

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In classic relative-value analysis the top-down approach refers to:

A) ranking the holdings in a corporate bond portfolio according to the relative market value of each asset class, beginning with the highest value.

B) looking for undervalued assets and ranking them from most to least undervalued.

C) using large-scale economic information to allocate funds to various corporate asset classes.

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Large scale (i.e. macro) economic information concerns data such as inflation, interest rate changes, and the level and direction of the overall economy (both domestic and foreign). Top-down analysis seeks to allocate funds to those issues that would benefit the most from the expected large-scale economic changes/trends.

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Which of the following is an example of a bottom-up approach of classic relative value analysis that would indicate an undervalued issue?

A) Due to continued strong earnings growth of XMP Corporation, their bond’s credit rating is expected to be upgraded. The manager of a corporate bond portfolio does not believe this is reflected in the current market value.

B) The manager of a corporate bond portfolio expects the increased debt usage of Corey, Inc., together with the prospect of greater competition and lower profit margins, will lead to a decrease in the credit rating of Corey bonds. These expectations are not reflected in the current market value of the bonds.

C) General economic conditions indicate the inflation rate will decline over the next year, with the expectation this will result in reducing the required yield for outstanding bonds in all maturity classes.

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If a bond’s credit rating is upgraded, the required yield will decline and the market value of the bond will increase. If this event is not currently reflected in the value of the bond then it represents an undervalued security.

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Which of the following statements about cyclical and secular changes in the primary bond market is least accurate?

A) One factor that can cause structural changes in the bond market is the desire of issuers to minimize financing costs under different yield curve and spread scenarios.

B) Structural changes in the composition of the bond market can occur rapidly.

C) Relative corporate bond returns frequently perform best when the supply of bonds is relatively plentiful.

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Structural changes occur slowly and have long-term implications for bond portfolio investment decisions. These changes are the result of issuers attempting to minimize their funding costs under different yield curve and spread scenarios.

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Which of the following statements about bond market characteristics is least accurate?

A) During the 1990s, new bond issuances had narrower spreads and relatively strong returns.

B) Callable issues are no longer dominant in the high-yield segment of the corporate bond market.

C) Bond managers adjust their portfolios in response to, or in anticipation of, structural changes in the composition of the bond market.

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In the high-yield market segment, callable issues are still dominant, although this may change in time. Bullet and intermediate structures now dominate the other segments.

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Which of the following statements about bullet maturity bonds is CORRECT?

A) Bullet and intermediate structures are currently dominant in all but the high yield segment of the corporate bond market.

B) A majority of bullet maturity bonds have sinking funds.

C) A call feature is an integral part of a bullet maturity bond.

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Bullet and intermediate structures currently dominate all but the high yield segment of the corporate bond market. Bullet maturities cannot be callable, putable, or have sinking funds.

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Which of the following statements about bond markets is least accurate?

A) Although duration tilts can be accomplished with corporate bonds, many bond managers prefer the use of Treasuries to play the yield curve.

B) Technological advancements, together with increased competition among corporate bond traders, will lead to less liquid global corporate bond markets because the number of issues available will not increase at a fast enough pace to keep up with the increased level of demand.

C) Qualitative issues that differentiate the management of an international bond portfolio versus a purely domestic one, include, differences in time zones and differences in market structure and conventions.

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Liquidity will most likely increase in the future because technological advances in trading systems and communication of information, together with greater competition among bond traders, will lead to higher volumes of bond trading, an important element in liquidity.

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For the management of a fixed-income portfolio, which of the following is an important implication of the increasing supply of corporate bonds within the last decade?

A) The average bond duration has increased.

B) Portfolio managers have more ways to satisfy their risk and return objectives.

C) The relative performance of corporate bonds has decreased.

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Greater supply means more issues from which managers can choose. The greater the number of issues provides managers with more opportunities to select securities that match their investment objectives, whether that be to fund some liability stream, or attempt to outperform some benchmark return.