Bond And Coupons

Question 1

Bond

Answer 1

-interest-bearing security which promises to pay (1) a stated amount of money ob the maturity date and (2) regular interest payments called coupons.

-is a fixed income instrument that represents a loan made by an investor to a borrower.

Question 2

term of a bond

Answer 2

the fixed period of time (in years) until the maturity date.

fixed period of time in years at which the bond is redeemable

Question 3

signification of the maturity date of a bond

Answer 3

The maturity date is when the bondholder gets back the principal amount.

Question 4

Fair Price of a Bond

Answer 4

the present value of all cash inflows to the bondholder.

Question 5

What is a coupon in the context of bonds?

Answer 5

the interest payment made to bondholders, usually paid semi-annually.

Question 6

Coupon amount

Answer 6

The coupon rate is used only for computing the _______.

Question 7

False

Answer 7

True or False: The coupon rate is the rate at which money grows.

Question 8

What reflects current market conditions when valuing a bond?

Answer 8

The market rate reflects current market conditions.

Question 9

purpose of the market rate in bond valuation

Answer 9

The market rate is used to compute the present value of future payments.

Question 10

Coupon Rate

Answer 10

The rate per coupon payment period

Question 11

Price of a bond (P)

Answer 11

The rate per coupon payment period at purchase time