Bonds

Question 1

Bonds

Answer 1

Bonds are fixed-income instruments that represents a loan madeby an investor to a borrower.

Question 2

Why bonds are referred as fixed -income instruments

Answer 2

Bonds are referred to as fixed income instrument because traditionally bonds paid a fixed interest rate (coupon) to the debtholder

Question 3

Face value (par value) of the bond

Answer 3

Is the amount the bond will be worth at maturity

Question 4

Coupon rate

Answer 4

Interest rate that the bond issuer will pay annually on the face value of the bond

Question 5

Coupon dates

Answer 5

Coupon dates are the dates on which the bond issuer will make interest payment

Question 6

Maturity date

Answer 6

Is the date on which the bond will mature and the bond issuer will pay the bond holder the face value of the bond

Question 7

Yield Curve

Answer 7

Yield Curve is the plot of yield with respect to time, the yield curve will have logarthmic growth. Meaning with longer durations I will have higher yield becaue there is more risk attached when holding this risk more

Question 8

Yield is calculated by dividing the annual coupon payment over Bond Face value

Answer 8

True