Chapter 6 Cue Cards

Questão	Responda
Governments and Corporations borrow money for long term by issuing securities called ________	BONDS
Interest payment paid to bondholders is a ____________ payment	Coupon
Payment at maturity of bond is called:	Face Value, Principal or Par Value
Date when bond will be paid off...	Maturity Date
What is the coupon rate	Annual interest payment divided by face value
Interest Rate (aka. Discount rate) is the rate at which cash flows from bond are discounted to determine PV T/F?	True
Coupon Rate and Discount Rate are the same (T/F)	False When they are not, the price of bond is not same as face value
Price of a bond is PV of all future cash flows aka PV of coupon payments and face value of bond T/F?	True
When does bond sell at face value?	When Coupon Rate = Required Return
What does it mean: Bond sells at a premium	Coupon rate is higher than required return Therefore bond sells above face val
What does it mean: Bond sells at a discount	Coupon rate is lower than required return Therefore bond sells below face val
Current Yield is..?	Annual Coupon payment divided by bond price
Yield to Maturity (YTM) is...?	Interest rate for which the present value of the bonds payments equals the price
Rate of Return is...?	Earnings per period per dollar invested Formula = Coupon income + price change / Investment
Taxes reduce the rate of return on an investment T/F	True
What is a Real Return Bond	Bonds with variable nominal coupon payments, determined by fixed real coupon payment and inflation
What is the Fisher Effect	Nominal Interest rate is determined by real interest rate and expected rate of inflation
What is Expectations Theory	An explanatory theory that shows why there are different shapes of the yield curve
What is interest rate risk?	Risk in bond prices due to fluctuations in interest rates
Longer term bonds get hit softer than shorter term bonds by interest rate Changes T/F	False
Lower Coupon Bonds get hit harder than bonds with higher coupons T/F	True
What is default risk	Bond issuer may default on bonds
What is a Default premium	Difference between promised yield on a corporate bond and yield on Canada bond with same coupon and maturity
Bond rating companies (x3)	Dominion Bond Rating Service Moodys Standard and Poor's
BBB+ are: ________________ bonds BB - are : _______________ bonds	Investment Grade (+) Speculative/High Yield/Junk (-)
Types of Bonds: (x6)	Zero-Coupon Strip Floating Rate Convertible Callable Canada Call

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	Criado por dylan_earl mais de 9 anos atrás