hw 5

Question 1

Bonds are____

Answer 1

issued by governments or corporations
less costly than bank loans for borrower
loans from investors to issuers

Question 2

what is not reflected on the indenture?

Answer 2

bonds price bc it is continuously fluctuating

Question 3

Excel function to find flat/clean price of bond in % of par

Answer 3

Price() function

Question 4

what is a bond’s YTM?

Answer 4

the return you’ll earn if you hold the bond to maturity and yields stay the same

Question 5

what can impact the YTM of a bond compared to another?

Answer 5

bond rating, time to maturity

Question 6

when are companies most likely to call back their issuances?

Answer 6

when the YTM is much lower than the coupon rate

Question 7

term structure of interest rates

Answer 7

relationship between a bond’s time to maturity and its yield

Question 8

what can impact treasury yield curve?

Answer 8

interest rate risk, real rate of interest, expected inflation