12.2 Flashcards
In a bond price quotation, the price of the bond is given as….
a percentage of its face value.
bid price
the price a dealer is willing to pay for a government security.
asked price
the price is dealer is willing to sell a government security.
the most important questions to ask when being aware of financial stability of the issuer of your bonds are…
Will the bond be repaid at maturity?
Will you receive interest payments until maturity?
What are sources of info on bonds?
Annual reports, internet, business magazines, government reports and research.
As you read an annual report, you should ask….
Is the first profitable?
Are sales increasing?
Are long term liabilities increasing?
How might the companies current activities and future plans affect its ability to repay bonds?
Before you invest in a particular corporate or municipal bond, you should…
check its rating
What is the highest category of bonds?
Investment-grade bonds
What bonds are safe investments that provide a predictable source of income?
Investment grade bonds
checking a bonds rating will give you a good idea of the…
quality and risk associated with that bond
investment-grade bond
bonds that are issued by financially stable companies or municipalities.
When determining investment value, high grade is…
Best quality and more secure.
When determining investment value, medium grade is
had favorable attributes, adequate security.
When determining investment value, speculative is…
Some risky elements, can not be certain on principal or interest payments.
When determining investment value, default is…
unlikely to be repaid, highly risky, poor investments.
You can measure a bonds yield by
- calculating its current yield
- considering the yield to maturity of a bond
Yield
rate of return, usually stated as a percentage, earned by an investor who holds a bond for a certain period of time.
What are 4 things you should understand in order to determine if a bond is a good investment?
- by understanding bond price quotations
- researching various sources of information on bonds
- checking bond ratings
- calculating the yield of your bond investment
A bonds face value is usually how much money?
1,000$
How do you find the current market value (or price) for a bond?
multiply the face value by the price quotation given in the newspaper
purchases and sales of bonds are reported in
tables
