Bond Interview Questions & Answers

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Bond Interview Questions & Answers

Are you a policy maker? Wanted to extend your growth to greater heights? But want to know about the functions of bond that works between the investor and corporation? our site experts wisdom jobs will guide you with all the updates related to your field. As a trained bond analyst you have to guide the companies and businesses in making investment strategies and decisions, gathering financial information, understanding it and giving their professional opinions and recommendations to financial institutions. You need to be confident, organized and detailed oriented. If you are a trained graduate then surely a career in bond analyst will take you to greater heights. So, look beyond our bond interview job interview questions and answers which will make you well prepared for the job interview and makes you to reach your destination easier.

Bond Interview Questions

Bond Interview Questions
    1. Question 1. Who Can Offer These Long Term Infrastructure Bonds?

      Answer :

      The entities like LIC, IDFC, IFCI and other NBFCs which are classified as Infrastructure Finance Companies by RBI shall be allowed to issue these long term infrastructure bonds.

    2. Question 2. What Is Non Convertible Debentures (ncd)?

      Answer :

      Nonconvertible debentures are unsecured bonds that cannot be converted to company equity or stock. Nonconvertible debentures usually have higher interest rates than convertible debentures. A fixed deposit is an arrangement with a bank where a depositor places money in the bank and is paid a regular fixed profit.

      Debentures are long-term financial instruments which acknowledge a debt obligation towards the issuer. Some debentures have a feature of convertibility into shares.

    3. Question 3. What Is A Junk Bond?

      Answer :

      A junk bond, also known as a "high-yield bond" or "speculative bond," is a bond rated "BB" or lower because of its high default risk. Junk bonds typically offer interest rates three to four percentage points higher than safer government issues.

    4. Question 4. What Is A Callable Bond?

      Answer :

      Callable bonds, also known as "redeemable bonds," can be redeemed by the issuer prior to maturity. Usually a premium is paid to the bond owner when the bond is called.

      The main cause of a call is a decline in interest rates. If interest rates have declined since a company first issued the bonds, it will likely want to refinance this debt at a lower rate. In this case, the company will call its current bonds and reissue new, lower-interest bonds to save money.

    5. Question 5. Is Pan Also Mandatory While Investing In Ncd?

      Answer :

      Yes, quoting PAN number in the NCD application form is compulsory irrespective of the amount involved as per SEBI guidelines.

    6. Question 6. Can I Apply In Joint Names?

      Answer :

      Yes application can be made in joint names with a maximum of three applicants, however the demat account shall also be held in the joint names and order of applicant shall be the same as appearing in the demat account. In case of application made in joint names, the tax benefit shall only be availed by the first applicant.

    7. Question 7. Who Would Get The Interest In Case Of The Joint Application Of Bonds?

      Answer :

      In case of joint application the interest shall be paid to the account of the first applicant only.

    8. Question 8. Do We Require A Demat Account For Investing In Ncds?

      Answer :

      Yes, because all the recent issues of NCDs were compulsorily in the dematerialized form.

    9. Question 9. What Is A Convertible Bond?

      Answer :

      A convertible bond may be redeemed for a predetermined amount of the company's equity at certain times during its life, usually at the discretion of the bondholder. Convertibles are sometimes called "CVs."

      Issuing convertible bonds is one way for a company to minimize negative investor interpretation of its corporate actions. For example, if an already public company chooses to issue stock, the market usually interprets this as a sign that the company's share price.

    10. Question 10. Can I Get Loan On These Bonds?

      Answer :

      You cannot avail of any loan pledging these bonds in the first 5 years. Thereafter, these bonds may be pledged to avail of loans.

    11. Question 11. What Are Different Type Of Bonds Based On Their Issuers?

      Answer :

      Different type of Bonds based on their issuers are:-

      1. Corporate Bonds .
      2. Convertible Bonds.
      3. Callable Bonds.
      4. Term Bonds.
      5. Amortized Bonds.
      6. Adjustment Bonds.
      7. Junk Bonds.
      8. Angel Bonds.

    12. Question 12. What Is The Tenure & Lock-in Period Of These Tax Free Infrastructure Bonds?

      Answer :

      The Tenure of these bonds shall be 10 years and the bonds have a lock-in of 5 years.

    13. Question 13. What Is A Adjustment Bond?

      Answer :

      Issued by a corporation during a restructuring phase, an adjustment bond is given to the bondholders of an outstanding bond issue prior to the restructuring. The debt obligation is consolidated and transferred from the outstanding bond issue to the adjustment bond. This process is effectively a recapitalization of the company's outstanding debt obligations, which is accomplished by adjusting the terms (such as interest rates and lengths to maturity) to increase the likelihood that the company.

    14. Question 14. What's The Difference Between Ncds & Fds?

      Answer :

      Following are the differences between an NCD and an FD:

      1. Liquidity: In contrast to a NCD, FD can't be sold in the market. As NCDs are listed on a stock exchange, you can sell them any time you want. However, bank FDs are also highly liquid and can be encashed before maturity with minor penal charges.
      2. Safety: While NCDs are secured debt, corporate FDs are altogether unsecured and bank FDs are secured to the extent of Rs one lakh only.
      3. Taxation.

    15. Question 15. Can A Minor Apply For Subscription To These Bonds?

      Answer :

      A minor is not eligible to apply for subscription to these bonds.

    16. Question 16. Will Tds Be Deducted On These Bonds?

      Answer :

      No TDS shall be deducted on the interest received as these bonds are issued Compulsorily in demat mode and shall be listed on NSE & BSE.

    17. Question 17. How Will I Get My Interest On The Due Date?

      Answer :

      The interest shall be credited to the respective Bank account registered with the demat account through ECS on the due date for interest payment, and -if the due date is a public holiday then the next working date. 

    18. Question 18. What Is The Benefit Of Investing In Tax Saving Infrastructure Bonds If They Offer The Same Tax Benefit?

      Answer :

      The tax exemption benefit under Sec 80CCF on a sum of Rs. 20,000/- is over and above Rs. 1,00,000/- benefit under section 80C, 80CCC and 80CCD. 

    19. Question 19. Can Nris Invest In Ncds?

      Answer :

      Yes, NRIs can invest in NCDs provided the company issuing NCDs allows them to invest in it. 

    20. Question 20. Can I Redeem My Fd Before The Original Term?

      Answer :

      Yes, FD can be closed before the original term of the FD. In the event of the Fixed Deposit being closed before completing the original term of the deposit, interest will be paid at the rate applicable on the date of deposit, for the period for which the deposit has remained with the Bank. In case of premature withdrawal the deposit may be subject to penal rate of interest as prescribed by the Bank on the date of deposit. 

    21. Question 21. What Is A Amortized Bond?

      Answer :

      An amortized bond is a financial certificate that has been reduced in value for records on accounting statements. An amortized bond is treated as an asset, with the discount amount being amortized to interest expense over the life of the bond. If a bond is issued at a discount - that is, offered for sale below its par (face value) - the discount must either be treated as an expense or amortized as an asset.

      Amortization is an accounting method that gradually and systematically.

    22. Question 22. Who Are The Eligible Investors For Bonds?

      Answer :

      Only Resident Indian individuals (Major) and HUF can invest in these bonds.

    23. Question 23. What Would Happen If I Apply Amount More Than Rs. 20,000/-?

      Answer :

      The allotment shall be made for the sum applied, however the benefit under section 80CCF may only be availed for a maximum sum of Rs. 20,000/-.

    24. Question 24. Are These Infrastructure Bonds Tax Free?

      Answer :

      No, the interest received in these bonds is not tax free. The investor is liable to pay tax on the interest received.

    25. Question 25. How To Purchase Ncds?

      Answer :

      Companies will commence the public issue of NCDs for a specified period of time. After that the NCDs are listed on the stock exchange. Investors who are interested in investing in the NCDs can purchase the NCDs from the open market through registered brokers.

    26. Question 26. I Don't Have A Pan Card. Can I Still Apply For Subscription?

      Answer :

      PAN card is mandatory for subscribing to these bonds.

    27. Question 27. What Is An Angel Bond?

      Answer :

      Angel bonds are investment-grade bonds that pay a lower interest rate because of the issuing company's high credit rating. Angel bonds are the opposite of fallen angels, which are bonds that have been given a "junk" rating and are therefore much more risky.

      An investment-grade bond is rated at minimum "BBB" by S&P and Fitch, and "Baa" by Moody's. If the company's ability to pay back the bond's principal is reduced, the bond rating may fall below investment-grade.

    28. Question 28. What Is The Tax Treatment Of Interest On Infrastructure Bonds?

      Answer :

      The interest received on these bonds shall be treated as income from any other source and shall form part of the total income of the assessee in that financial year in which they are received.

    29. Question 29. What Is A Bond?

      Answer :

      Bond is a debt instrument issued for a period of more than one year with the purpose of raising capital by borrowing. The Federal government, states, cities, corporations, and many other types of institutions sell bonds. Generally, a bond is a promise to repay the principal along with interest (coupons) on a specified date (maturity). Some bonds do not pay interest, but all bonds require a repayment of principal. When an investor buys a bond, he/she becomes a creditor of the issuer.

    30. Question 30. What Is The Maximum Amount For Which The Benefit U/s 80ccf Be Availed?

      Answer :

      Maximum benefit to an investor shall be Rs. 20,000/- under section 80CCF of the Income Tax Act, 1961.

    31. Question 31. What Is A Corporate Bond?

      Answer :

      A company can issue bonds just as it can issue stock. Large corporations have a lot of flexibility as to how much debt they can issue: the limit is whatever the market will bear. Generally, a short-term corporate bond has a maturity of less than five years, intermediate is five to 12 years and long term is more than 12 years.

      Corporate bonds are characterized by higher yields because there is a higher risk of a company defaulting than a government.

    32. Question 32. Is Investing In Ncds Better Than Parking Funds In Corporate And Bank Fds?

      Answer :

      NCDs vs. Corporate fixed deposits: Yes, of course NCDs are better than company FDs. Though usually the interest rates on NCDs and company FDs are more or less the same, what tilts the balance in favour of NCDs is the risk-return factor. Furthermore, there is also potential to earn capital appreciation from NCDs if there is a downward movement in the interest rates.

      NCDs vs. Bank fixed deposits: Again, NCD is better than a bank FD because the interest differential is quite significant .

    33. Question 33. What Are Income Tax Implications? How The Returns From Ncds Are Taxed?

      Answer :

      There can be two types of income from NCDs:

      1. First is the interest income from a NCD and tax treatment is exactly similar to any other interest income such as interest income from FDs. In other words, interest income from NCDs will be subjected to tax at normal rates by including it in 'Income from other sources'.
      2. Next is capital gains. If you decide to sell the NCDs on the stock exchange, capital gains can also arise. If NCDs are sold with in a period of 12 months .

    34. Question 34. What Are Non-convertible Debentures (ncds)?

      Answer :

      Non-convertible debentures (NCDs) are debt instruments with a fixed tenure issued by companies to raise money for business purposes. Unlike convertible debentures, NCDs can't be converted into equity shares of the issuing company at a future date.

    35. Question 35. State Sampling Theorem?

      Answer :

      Municipal Bonds are Debt securities issued by state and local governments, and special districts and counties.

    36. Question 36. What Is A Term Bond?

      Answer :

      • Term bonds are bonds from the same issue that share the same maturity dates. Term bonds that have a call feature can be redeemed at an earlier date than the other issued bonds. A call feature, or call provision, is an agreement that bond issuers make with buyers. This agreement is called an "indenture," which is the schedule and the price of redemptions, plus the maturity dates.
      • Some corporate and municipal bonds are examples of term bonds that have 10-year call features.

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