Test 3 Ch. 5-6
One-hundredth of a percentage point
A basis point is _.
The credit rating increases, the default risk decreases, and the required rate of return decreases.
As the rating of a bond increases(for example, from A, to AA, to AAA), it generally means that
fixed income
Bonds are sometimes called _ securities because they pay set amounts on specific future dates
semiannual
Most U.S. corporate and government bonds choose to make _ coupon payments.
current yield
The _ is the annual coupon payment divided by the current price of the bond, and is not always an accurate indicator.
Par value
The _ is the face value of the bond.
coupon
The _ is the regular interest payment of the bond.
yield to maturity
The _ is the return the bondholder receives on the bond if held to maturity
indenture
The _ is the written contract between the bond issuer and the bondholder.
Effective Annual Rate (EAR)
The actual rate paid or received after accounting for compounding is called
False
The coupon payment for an annual-coupon corporate bond is equal to the yield to maturity multiplied by the par value of the bond.
The accumulated interest over the life of the bond
The difference between the price and the par value of a zero-coupon bond represents _.
number of compounding periods per year
To determine the interest paid each compounding period, take the advertised annual percentage rate and divide it by the _ to get the appropriate periodic interest rate, often called the "period rate."
Secured debt will have a lower coupon than a debenture
When a bond is first issued the corporation tries to set the coupon close to the yield. Which of the following is true (holding all else equal)?
A callable bond will have a higher coupon compared to a non-callable bond
When a bond is first issued the corporation tries to set the coupon close to the yield. Which of the following is true(Holding all else equal)?
False; They are priced at steep discounts
Zero-coupon bonds are priced at steep premiums.
debentures
_ are always unsecured bonds.