Lecture 5,6,9 Flashcards
1
Q
What kind of income does bonds provide
A
periodic income
capital gains
2
Q
What are the features of a bond
A
interest/coupon payments
principal
term to maturity
3
Q
What are the factors that affect a bond’s maturity?
A
call provision
sinking fund provision
4
Q
What are the types of collateral?
A
secured
unsecured
5
Q
What are the risks associated with interest rate
A
reinvestment
price
6
Q
What are the 2 models for bond valuation
A
present value model
yield model
7
Q
What are the methods to computing bond yields?
A
nominal current promised YTM promised YTC realised/horizon yield
8
Q
What is bond price volatility affected by?
A
maturity
coupon
9
Q
What are the types of bonds?
A
perpetual zero coupon debentures/unsecured secured income floating rate-bond zero-coupon bond bearer bond registered bond
10
Q
What are the components of interest rate
A
real risk free interest rate
expected inflation
risk premium
11
Q
What is risk premium affected by?
A
credit quality
term to maturity
indenture provisions
foreign bond risk
