Boken kap 5 del 1 Flashcards
Q: What is a bond?
A: A bond is a certificate showing that a borrower owes a specified sum.
Q: Who are typical issuers of bonds?
A: Corporations, private firms, banks, and governments.
Q: What is unique about the government bond market?
A: It is one of the largest and most liquid markets in the world.
Q: Why do governments issue bonds?
A: To manage their long and short-term cash flow requirements.
Q: How do companies differ from governments in terms of issuing securities?
A: Companies can issue both debt (bonds) and equity (stocks).
Q: What does “term to maturity” mean in bonds?
A: It refers to the life of the bond.
Q: What is the coupon rate?
A: It is the percentage of the bond’s par value paid as interest to the bondholder.
Q: What is the par value of a bond?
A: It is the face value or principal of the bond
Q: What is a pure discount bond?
A: A bond that promises a single payment at a fixed future date without regular interest payments.
Q: Why are pure discount bonds called zero-coupon bonds?
A: Because there are no payments until the maturity date.
What is the Maturity date?
the day the last payment is done.
Q: When is the face value of a pure discount bond paid?
A: At the maturity date.
Q: What are the cash flows for level coupon bonds?
A: Regular payments (coupons) are made until the maturity date.
