Fixed Income (10-12%)

Question 1

Accrued Interest

Answer 1

Question 2

Annual Bond

Answer 2

Question 3

Basic Features of Fixed-Income Securities

Answer 3

Coupon Rate: Interest rate issuer agrees to pay
Maturity: Time until principal paid
Par Value: Bond’s Principal/Face Value
Issuer: Sovereign Governments, Corporate Issuers
Sinking Fund Provision: Periodic payments to retire bonds early

Question 4

Current Yield

Answer 4

Question 5

Effective Annual Yield

Answer 5

Question 6

Forward rate and Spot rate calculation

Answer 6

Question 7

Full Price

Answer 7

Question 8

Option-Adjusted Price

Answer 8

Question 9

Pricing with Forward Rates

Answer 9

Question 10

Pricing with Spot Rates

Answer 10

Question 11

Semi-Annual Bond

Answer 11

Question 12

Types of Bonds

Answer 12

Callable Bonds: Issuer can force investors to sell their bonds. Increases yield and lowers duration.
Putable Bonds: Investor can sell bond back to issuer. Lowers yield and duration.
Convertible Bonds: Bondholders can convert bonds to common shares
Eurobond: international bond denominated in currency not native to country where it is issued.