Bonds Flashcards
This deck only covers KEY definitions. Read Notion for key concepts, maths, and theories.
What are bonds?
Debt obligations involving a loan, followed by repayment of interest and principal.
What is an indenture?
The name given to any agreement defining a debt.
What are zero coupon bonds?
When the bond has no coupon payments, pays par value at maturity, and semi-annual compounding.
What are current yields?
The coupon as a percentage of the market price.
Define yield to maturity.
The discount rate that equates the PV of the future cash flows with the current bond price.
What is yield to call?
The price of a callable bond = the PV of the coupon payments to the call date + the PV of the call price
What is credit quality risk?
The possibility that the issuer will not be able to repay cash flows on time, or perhaps be unable to pay at all.
Define junk bonds.
High yield bonds of low credit quality corporate bonds.