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PART 1: VOCABUlARY PRAcneE

1.1 Choose the best deftnltlon for each tenn.
1. Cash flows
A. the part ownership of a company in the form of stocks or shares.
B. the price at which a market-maker or dealer is prepared to buy securities or other
assets.
C. a thing that is borrowed, especially a sum of money that is expected to be paid
back with interest.
D. the money a company receives and spends during a certain period.
2. Equity
A. the people or institutions to whom money is owned.
B. businesses that buy and sell securities.
C. the rate of income that an investor receives from a security.
D. the part ownership of a company in the form of stock or shares.
3. Principal
A. the compensation paid for the use of money, usually expressed as an annual
percentage.
B. the amount of capital making the company in the form of bonds or other loans.
C. the total amount of money being transferred into and out of a business.
D. the money that a company borrows in order to do business or finance its activities.
4. Coupon
A. the rate of income an investor receives from a security.
B. the payments by companies to their shareholders.
C. the amount of interest that a bond pays.
D. an improvement or increase in prices.
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5. Maturity
A. a situation in which prices or interest rates go up and down suddenly.
B. the length of time for which a bond is issued until it is repaid.
C. the process of a company expanding or varying its range of products.
D. the date on which a security was issued.

1.2 Match these tenns with their corresponding meanings.

1 IOU 2 Yield 3 Speculator

4 Market maker 5 Insolvent

A. a person who buys and sell goods, property, currency or shares in a company in
the hope of making a quick profit
B. a document showing how much money you owe to someone
C. the rate of income an investor receives from a security
D. unable to pay debts
E. a business that buys and sells securities

PART 2: CLOZE PASSAGES

2.1 Passage 1. Complete the passage with the words in the box.
raise repay maturity default yield withdraw

taxable bond debt issued ownership treasury

Corporate bonds (also called corporates) are (1) __ obligations, or IOU s (I

owe you), issued by private and public corporations. They are typically (2) III

multiples of$l,OOO and/or $5,000. Companies use the funds they (3) from selling
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bonds for a variety of purposes, from building facilities to purchasing equipment to

expanding their business.
When you buy a (4) , you are lending money to the corporation that issued it. The
corporation promises to (5) your money (also called principal) on a specified (6)
__ date. Until that time, it also pays you a stated rate of interest, usually semiannually.
The interest payments you receive from corporate bonds are (7) __ . Unlike stocks,
bonds do not give you a(n) (8) __ interest in the issuing corporation.

2.2 Passage 2. Complete the passage with the words In the box.
payments reserves liquidation dividend revives operation

bankruptcy cash flow profits distribution bondholders contribution

There are also risks and disadvantages associated with debt finance. In the event
of a corporate (1) , a companyD s assets are at risk of being taken over by its largest

(2) if it misses any scheduled interest or principal (3) . For instance, if a

company does not comply with the terms of the loan that was issued as a part of debt
finance, bondholders can trigger a (4) of the companyDs assets in order to be paid.
A company that is active in debt finance should exhibit discipline with its cash (5) __
and also must outline anticipated (6) __ over the period of the loans. There is less
flexibility with future (7) for a company active in debt finance versus equity
financing because of the payment (8) obligations.

PART 3: READING COMPREHENSION

3.1 Reading passage 1. Read the passage carefully and then brlefty answer the
following questions.
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WHAT ARE THE DIFFERENT TYPES OF BONDS?

There are an almost endless variety of bond types. In the U.S., investment-grade
bonds can be broadly classified into four types - corporate, government, agency and
municipal bonds - depending on the entity that issues them. These four bond types also
feature differing tax treatments, which is a key consideration for bond investors.
Corporate bonds
Corporate bonds are issued by public and private companies to fund day-to-day
operations, expand production, fund research or to finance acquisitions. Corporate
bonds are subject to federal and state income taxes.
Government bonds
U.S. government bonds are issued by the federal government. They are
commonly known as treasuries, because they are issued by the U.S. Treasury
Department. Money raised from the sale of treasuries funds every aspect of government
activity. They are subject to federal tax but exempt from state and local taxes.
Agency bonds
Government Sponsored Enterprise (GSE) like Fannie Mae and Freddie
Mac issue agency bonds to provide funding for the federal mortgage, education and
agricultural lending programs. These bonds are subject to federal tax, but some are
exempt from state and local taxes.
Municipal bonds
States, cities and countries issue municipal bonds to fund local projects. Interest
earned on municipal bonds is tax-free at the federal level and often at the state level as
well, making them an attractive investment for high-net-worth investors and those
seeking tax-free income during retirement.

Questions
1. What are two differences of bond types mentioned in the passage?
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2. What institutions issue treasuries?

3. What does GSE represent?

4. Why are GSEs issued?

3.2 Reading passage 2. Read the passage carefully and then brlefty answer the
following questions.

UNDERSTANDING HEDGE FUNDS

Hedge funds are private investment funds which are only open to a limited range
of investors, the number of which is determined by its regulators, but is restricted by law
to no more than 100 investors per fund. They are special in that they are exempt from
many of the rules and regulations governing other mutual funds, and this allows them to
undertake a wider range of trading activities and employ more aggressive strategies than
are normally permitted. As a consequence of the restricted number of investors, most
hedge funds set an extremely high minimum investment amount, ranging from $250,000
to as much as $1 million. Investors also have to pay an annual performance fee to the
investment manager, as is standard practice for mutual funds; however, hedge funds also
collect a percentage of the profits (usually 20 %).
The underlying philosophy of hedge funds which originated on Wall Street in the
1940s as an investment option for the extremely wealthy is wealth preservation. They
operate on the principle of absolute return of making money on an ongoing basis,
regardless of market fluctuations. This is an attractive proposition for investors and
hedge fund activity has increased greatly over the last 15 years.

Questions
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1. Who decides the number of investors of a hedge fund?

2. What is the principal characteristic that distinguishes hedge funds from other types of
mutual fund?

3. Why does the minimum investment for a hedge fund tend to be high?

4. What does the principle of 'absolute return' entail?

PART 4: TRANSlATION
4.1 EnlPlsh - Vietnamese translation: Translate the following sentences Into
Vietnamese.
1. If they need to raise more money to expand their operations, they can either issue
new shares - or borrow money, usually by issuing bonds.

2. For investors, bonds are generally safer than stocks or shares, because ifan insolvent
or bankrupt company sells its assets, bondholders are among the creditors who might
get some of their money back.

3. If tax revenue is insufficient, governments also issue bonds to raise money, and these
are considered to be a risk-free investment.
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4. Only brave hearts would look at getting back into the stock market at the moment,
as it is still unclear whether we are headed for a worldwide recession or depression.

5. This fund aims to achieve a high and steady income and above average yield, while
taking into account the security of capital.

4.2 VletnaJlle8e - EnlPlsh translafton: Translate the following sentences Into

EnlPlsh.
1. Trai phieu chinh phil duoc xem nhu la khong c6 rui ro va thuong duoc giao dich (1

thi tnrong c6 tinh thanh khoan cao.

2. M9t s6 trai phieu chinh phil gioi han s6 hrong d6ng do la c6 th~ duoc mua trong m6i
mot nam dirong lich.

3. Trai phieu doanh nghiep cho phep cong ty vay tien t11Jctiep til cac nha d~u tu ca
nhan va t6 chirc d~u tu.
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4. Til quan diem cua cac nha phat hanh trai phieu, trai phieu thinh thoang t6t hon c6
phieu boi vi Eii su~t tra cho trai chu duoc kh~u tnr thue,

5. Trai phieu c6 Eii su~t cao d~ thu hut cac nha d~u tu. Tuy nhien cac nha d~u tu than
trong c6 th~ t:;10ra mot nguon thu kha kha til 10:;1itrai phieu nay.

PART 5: WRITING
Make meaningful sentences by adding between 8 and 15 words to the given
words.
1. Bond holders can get back .
2. A company that wants to raise cash can .
3. The Primary Market is .
4. If a company goes bankrupt, .
5. The yield of a bond .