FIS_LN1

Question 1

Bond

Answer 1

debt security requiring issuer to make repayments plus interest to lender

Question 2

principal(face value)

Answer 2

amount the issuer agrees to repay the bondholder at the maturity date

Question 3

T-bills

Answer 3

securities with maturity <1 yr or less, do not pay coupons

Question 4

T-notes

Answer 4

securities with maturity between 1-10 yrs, pay fixed semi annual coupons

Question 5

T-bonds

Answer 5

securities with maturity longer than 10yrs, pay fixed semiannual coupons

Question 6

TIPS

Answer 6

Treasury Inflation Protected Secuities: securities with maturities of 5, 10, and 30 yrs whose principal payment is adjusted for inflation, pay varying semi annual coupons.

Question 7

FRNs

Answer 7

Floating rate notes: securities with maturities 2 to 5 years and variable interest rate tied to a benchmark, pay varying quarterly coupons

Question 8

investment grade bonds

Answer 8

BBB or higher credit rating

Question 9

high yield

Answer 9

BBB or lower, higher risk of default

Question 10

commercial paper (CP)

Answer 10

short term, unsecured debt instrument issued by a corporation, typically to finance short term liabilities, maturities usually under 270 days

Question 11

risks associated with investing in bonds

Answer 11

interest rate, reinvestment, credit, call, inflation, exchange, liquidity, volatility