chapter 3

Question 1

convertible bonds

Answer 1

a corporate bond that can be converted at the investor’s choice into a fixed number of common shares of the company

Question 2

Parity price

Answer 2

the market value at which an investor is indifferent towards owning a convertible bond or converting into the underlying common stock

Question 3

Mortgage-backed securities (MBS)

Answer 3

pools of mortgages that are turned into bonds, helping to create more liquidity in the mortgage market

Question 4

Collateralized mortgage obligations ( CMOs)

Answer 4

Mortgage-backed securities that are structured by broke-dealers and divided into tranches, each varying by expected maturity, credit quality, and exposure to investment risk

Question 5

General obligation (GO) bonds

Answer 5

Municipal bonds issued to finance a non-revenue- producing facility (EX public park, public school or public library) and backed by the taxing power of the issuing municipality

Question 6

Revenue bonds

Answer 6

Municipal bonds issued for and backed by a revenue-producing facility( EX toll road, airport)

Question 7

Money Market securities

Answer 7

VERY SAFE and liquid debt securities with ,maturities of one year or less, including treasury bills, negotiable certificates of deposit and commercial paper