Bonds Flashcards

This deck only covers KEY definitions. Read Notion for key concepts, maths, and theories.

1
Q

What are bonds?

A

Debt obligations involving a loan, followed by repayment of interest and principal.

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2
Q

What is an indenture?

A

The name given to any agreement defining a debt.

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3
Q

What are zero coupon bonds?

A

When the bond has no coupon payments, pays par value at maturity, and semi-annual compounding.

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4
Q

What are current yields?

A

The coupon as a percentage of the market price.

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5
Q

Define yield to maturity.

A

The discount rate that equates the PV of the future cash flows with the current bond price.

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6
Q

What is yield to call?

A

The price of a callable bond = the PV of the coupon payments to the call date + the PV of the call price

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7
Q

What is credit quality risk?

A

The possibility that the issuer will not be able to repay cash flows on time, or perhaps be unable to pay at all.

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8
Q

Define junk bonds.

A

High yield bonds of low credit quality corporate bonds.

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