Bonds and term structure of interest rate

Question 1

How do you get nominal rate of return?

Answer 1

Inflation (1.xx) * Rate of return in absence of inflation (1.xx)

Question 2

What is a bond

Answer 2

A debt instrument, issued by a borrower for a fixed period of time, paying interest known as a coupon which is fixed at issue date and is paid periodically until it is redeemed at maturity

Question 3

What are places of issue we can classify bonds by?

Answer 3

• Domestic bonds
• Foreign bonds
• Eurobonds

Question 4

Who are some issuers of bonds

Answer 4

• Central governments
• Government agencies
• State/local governments
• Companies
• Supranational institutions (E.G world bank)

Question 5

What are the current types of gilts?

Answer 5

• Conventional gilts
• Index-linked gilts
• Gilt strips

Question 6

Zero coupon bonds have:

Answer 6

Only one payment on maturity