Microtheme: Bonds —
9 questions asked in Prelims in the past.

1. [2026] A bond whose proceeds are used only to finance or refinance a combination of both environmental and social projects is called:
   • (a) Green Bond
   • (b) Social Bond
   • (c) Sustainability Bond
   • (d) Sovereign Bond
   Correct Answer: (C) Sustainability Bond
2. [2024] Consider the following statements:
   Statement-I:
   If the United States of America (USA) were to default on its debt, holders of US Treasury Bonds will not be able to exercise their claims to receive payment.
   Statement-II:
   The USA Government debt is not backed by any hard assets, but only by the faith of the Government.
   Which one of the following is correct in respect of the above statements?
   • (a) Both Statement-I and Statement-II are correct and Statement-II explains Statement-I
   • (b) Both Statement-I and Statement-II are correct, but Statement-II does not explain Statement-I
   • (c) Statement-I is correct, but Statement-II is incorrect
   • (d) Statement-I is incorrect, but Statement-II is correct*
   Correct Answer: (A) Both Statement-I and Statement-II are correct and Statement-II explains Statement-I
3. [2024] Consider the following:
   1. Exchange-Traded Funds (ETF)
   2. Motor vehicles
   3. Currency swap
   Which of the above is/are considered financial instruments?
   • (a) 1 only
   • (b) 2 and 3 only
   • (c) 1, 2 and 3
   • (d) 1 and 3 only*
   Correct Answer: (D) 1 and 3 only*
4. [2024] In India, which of the following can trade in Corporate Bonds and Government Securities?
   1. Insurance Companies
   2. Pension Funds
   3. Retail Investors
   Select the correct answer using the code given below:
   • (a) 1 and 2 only
   • (b) 2 and 3 only
   • (c) 1 and 3 only
   • (d) 1, 2 and 3*
   Correct Answer: (D) 1, 2 and 3*
5. [2022] With reference to the Indian economy, what are the advantages of “Inflation-Indexed Bonds (IIBs)” ?
   1. Government can reduce the coupon rates on its borrowing by way of IIBs.
   2. IIBs provide protection to the investors from uncertainty regarding inflation.
   3. The interest received as well as capital gains on IIBs are not taxable.
   Which of the statements given above are correct ?
   • (a) 1 and 2 only
   • (b) 2 and 3 only
   • (c) 1 and 3 only
   • (d) 1, 2 and 3
   Correct Answer: (A) 1 and 2 only
6. [2022] With reference to Convertible Bonds, consider the following statements :
   1. As there is an option to exchange the bond for equity, Convertible Bonds pay a lower rate of interest.
   2. The option to convert to equity affords the bondholder a degree of indexation to rising consumer prices.
   Which of the statements given above is/are correct ?
   • (a) 1 only
   • (b) 2 only
   • (c) Both 1 and 2
   • (d) Neither 1 nor 2
   Correct Answer: (C) Both 1 and 2
7. [2021] Indian Government Bond Yields are influenced by which of the following?
   1.Actions of the United States Federal Reserve
   2.Actions of the Reserve Bank of India
   3.Inflation and short-term interest rates
   Select the correct answer using the code given below:
   • (a) 1 and 2 only
   • (b) 2 only
   • (c) 3 only
   • (d) 1, 2, and 3
   Correct Answer: (D) 1, 2, and 3
8. [2016] With reference to ‘IFC Masala Bonds’, sometimes seen in the news, which of the statements given below is/are correct?
   1. The International Finance Corporation, which offers these bonds, is an arm of the World Bank.
   2. They are the rupee-denominated bonds and are a source of debt financing for the public and private sector,
   Select the correct answer using the code given below.
   • (a) 1 only
   • (b) 2 only
   • (c) Both 1 and 2
   • (d) Neither 1 nor 2
   Correct Answer: (C) Both 1 and 2
9. [2016] What is/are the purpose/purposes of Government’s ‘Sovereign Gold Bond Scheme’ and ‘Gold Monetization Scheme’?
   1. To bring the idle gold lying with Indian households into the economy.
   2. To promote FDI in the gold and jewellery sector
   3. To reduce India’s dependence on gold imports
   Select the correct answer using the code given below.
   • (a) 1 only
   • (b) 2 and 3 only
   • (c) 1 and 3 only
   • (d) 1, 2 and 3
   Correct Answer: (C) 1 and 3 only