Debt - Bond Basics

Question 1

What is a Bond?

Answer 1

is a debt security which obligates the issuer to pay interest (usually semi-annually) and repay the principal amount when debt matures.

Question 2

Zero- Coupon Bond

Answer 2

Issued at par, NO interest payments, Purchased at a discount, & redeemed at maturity.

Question 3

Term Bond Issue (2 Types)

Answer 3

Every bond issued has the same interest rate and maturity. Corporate and US bonds

Question 4

Serial Bonds

Answer 4

Bond issued with different maturities w/ different rates.

Quoted on a yield basis.

Question 5

Balloon Maturity

Answer 5

Each maturity has different interest rate on bond.

longer maturity the higher the interest rate that investors demand

Question 6

Series Bonds

Answer 6

Bonds have same maturity but different dates of issuance.

Rarely used; but used on LT construction process.

Phasing bonds the total interest cost to issuer is reduced.

Question 7

What is a Corporate bonds price quote?

Answer 7

% of par w/ minimum charges of 1/8th

Question 8

What is a US Govt bonds price quote?

Answer 8

% of par value w/ minimum charges of 1/32nd

Question 9

What is 10 Basis Points as a %? & a $?

Answer 9

10 Basis points = .1% = $1