Bonds

Question 1

Bond

Answer 1

a security/loan issued to an “issuer” paying fixed income

Question 2

another name for creditor

Answer 2

investor

Question 3

another name for issuer

Answer 3

debtor

Question 4

what do bonds have

Answer 4

principal/face/par (same of $1000), coupon/interest/stated value (same %)

Question 5

debenture

Answer 5

long term unsecured corporate debt

Question 6

2 ways to quote bonds are?

Answer 6

percentage of PAR, and YIELD basis

Question 7

percentage of pay

Answer 7

price to BUY BOND

Question 8

yield basis

Answer 8

bond yield is the RETURN TO INVESTOR

Question 9

what is $1000 par quoted at 80

Answer 9

$800 bond price

Question 10

what is the basis point with a return of 5.2 to 5.3

Answer 10

10 basis points

Question 11

bid - ask = what?

Answer 11

spread

Question 12

investors buy at the (ask/bid)

Answer 12

ask

Question 13

investors sell at the

Answer 13

bid

Question 14

dealers (brokers) buy at the

Answer 14

bid

Question 15

dealers sell at the

Answer 15

ask

Question 16

how are corporate and municipal bonds quoted

Answer 16

1/8th
“whole or fraction”

Question 17

term bonds

Answer 17

issued at “SAME” date “ SAME” maturity

Question 18

serial bonds

Answer 18

issued at “SAME” date “DIFFERENT” maturity

Question 19

series bond

Answer 19

issued at “DIFFERENT” date “SAME” maturity

Question 20

zero coupon bond

Answer 20

issued at DEEP DISCOUNT and NO INTEREST PAYMENTS

Question 21

what bond is the balloon maturity related to?

Answer 21

serial (interval maturities)

Question 22

Balloon Maturity

Answer 22

where the majority of the bond is paid off at the END

Question 23

what kind of bond will be used to fund projects and why

Answer 23

series bond; because they are needed to fund long-term projects and dont need the money all at once

Question 24

US Treasury Notes/Bonds (government bonds) are quoted how?

Answer 24

1/32nds

Question 25

how do you find the dollar price of a muni and corp bond?

Answer 25

take the fraction and divide it. add this decimal to the "x" . move decimal to RIGHT ONCE

Question 26

how do you find the dollar price of a government bond?

Answer 26

change fraction to decimal, add to "x", move decimal right once

Question 27

how are serial bonds quoted

Answer 27

basis points

Question 28

how do interest rates affect bond prices?

Answer 28

inverse relationship falling interest = rising bond price

Question 29

types of bond yields/interest rate

Answer 29

nominal, current, YTM

Question 30

current yield formula

Answer 30

annual interest rate / bond mkt price

Question 31

yield to maturity

Answer 31

investor's total return

Question 32

sell @ discount order in highest to lowest

Answer 32

YTC , YTM, current , nominal

Question 33

sell @ premium order in highest to lowest

Answer 33

nominal , current , YTM , YTC

Question 34

(q): a bond is priced at 110. what does this mean?

Answer 34

it is selling above par at $1100 and is 10 BOND points above par

Question 35

M'37 meaning

Answer 35

mature at 2037

Question 36

(q): in 2022, a customer buys 1 ABC 10%, $1000 par debenture, M'37, at $115. Interest payment dates are Jan and Jul 1st. Current Yield?

Answer 36

8.70% (1000*10%) = 100 100/ 115 = .869

Question 37

20 basis points =

Answer 37

.002