Ch 9: Bonds

Question 1

Tbill

Answer 1

short term federal debt instruments

Question 2

Commercial Paper

Answer 2

short term unsecured debt issued by large corporations

Question 3

Banker’s acceptance

Answer 3

a postdated check in which a bank has

Question 4

Prime Rate

Answer 4

basic interest rate on a short term loan that the largest commercial banks charge to their most credit worthy customers

Question 5

Bank rate

Answer 5

interest rate that BOC offers to commercial banks overnigght reserve loans

Question 6

London Interbank Offered Rate

Answer 6

Interest rate that international banks charge one another overnight Eurodollar loans

Question 7

Pure discount security

Answer 7

an interest-bearing asset, makes a single payment of face value at maturity, makes no payments before maturity

Question 8

Bank discount basis

Answer 8

method of quoting interest rates on market instruments, such as banker’s acceptance and commercial papers

Question 9

Bond equivalent yields

Answer 9

a way of quoting a bond, using 365 days

Question 10

Treasury yield curve

Answer 10

against time to maturity curve is central to bond valuation