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Structured Note

Based on financial securities, commodities, or currencies.

Convertible Bond

Can be exchanged for shares of stock.

Which of the following terms apply to a bond? Coupon rate, Par value, Time to maturity, Dividend yield

Coupon Rate Par Value Time to Maturity

CAT Bond

Protects insurance companies from natural disasters.

A firm's bond rating sheds light on its ___ risk.

default

A humped term structure of interest rates indicates that interest rates are expected to ___ as the time to maturity increase.

increase and then decline

In general, a corporate bond's coupon rate __.

is fixed until the bond matures.

The default risk premium refers to the extra compensation demanded by investors for the possibility that the issuer might __.

not make all the promised payments

If a given set of cash flows is expressed in nominal terms and discounted at the nominal rate, the resulting present value will be the same as if the cash flows were expressed in real terms and discounted at the ___ rate.

real

What is a real rate of return?

It is a rate of return that has been adjusted for inflation.

What is the nominal rate of return on an investment?

It is the actual percentage change in the dollar value of the investment.

What is the definition of a bond's time to maturity?

It is the number of years until the face value is due to be repaid.

Put Bond

Owner can force issuer to repay prior to maturity at a stated price.

A corporate bond's YTM ____.

1. Can be > , = , < than the bond's coupon rate. 2. Changes over time.

Place the following bonds in order of security as defined in the US: Debentures Mortgage bonds

1. Mortgage Bonds 2. Debentures

What is usually included in a bond's indenture?

1. The total amount of bonds issued. 2. The repayment arrangements.

The US government borrows money by issuing:

1. Treasury bills 2. Treasury notes 3. Treasury bonds

What are the differences between Treasury bonds & corporate bonds?

1. Treasury bonds are free of default risk while corporate bonds are exposed to default risk. 2. Treasury bonds offer tax benefits to investors that corporate bonds cannot offer. 3. Treasury bonds are issued by the US government while corporate bonds are issued by corporations.

How is a zero coupon bond different from a conventional bond?

1. Zero coupon bonds make no interest payments. 2. Zero coupon bonds are always issued at a discount.