Debt

Question 1

Par Value

Answer 1

$1,000. 1 point / 1% = $10

Question 2

Last IG Rating

Answer 2

BBB for S&P (all caps) and Baa for Moody’s (proper name)

Question 3

Duration

Answer 3

Measure, expressed in years, of a fixed-income security’s price sensitivity to changes in interest rates. Higher duration = higher percent volatility.

Question 4

Conversion Ratio

Answer 4

Par / Conversion Price

Question 5

Conversion Parity

Answer 5

Price of convertible bond = aggregate market value of common stock if converted

Question 6

Share split price

Answer 6

INVERSE of split ratio

Question 7

Anti-dilutive feature on convertibles

Answer 7

If stock dividend, new # shares equals old # shares converted * dividend %

Question 8

Income Bond

Answer 8

No promise of interest unless income of COMPANY is sufficient. Trade w/o accrued interest.

Question 9

Eurodollar Bond

Answer 9

Issued outside US, pays int and principal in USD. Can trade in US after 40 days.

Question 10

Yankee Bond

Answer 10

Foreign bonds issued in US, paid in USD.

Question 11

Accrued Interest

Answer 11

Annual Interest $ * # accrued days / 360 or 365. Count up to and NOT settlement date. (Corps T+3, US Gov T+1)

Question 12

Constant yield method

Answer 12

Used for tax purposes on OID bonds.

Question 13

ADR

Answer 13

Facilitates forex

Question 14

Banker’s Acceptances

Answer 14

Facilitate foreign trade (import/export)

Question 15

Reverse Converts

Answer 15

Reverse convertible securities are short-term notes issued by banks and broker-dealers that usually pay a coupon rate above prevailing market rates. They are considered structured products because, in addition to the coupon rate, the investor may be required to purchase shares of an underlying asset at a fixed price. The underlying asset may be an equity security unrelated to the issuer, or a basket of stock, or an index. The issuer agrees to pay this higher coupon rate since it has an option to sell a security to the investor if the price of the security falls below a specified value known as the knock-in level. If the price of the underlying asset stays above the knock-in level, the investor will receive the high coupon and the full return of his principal. If the underlying asset falls below the knock-in level, the investor will be obligated to purchase shares of the underlying asset at a fixed price. The price of this asset may have depreciated below the knock-in level and the investor may receive substantially less than the original principal.