SQ Investments Flashcards
If overall interest rates in general fall, the prices of outstanding bonds ________ and the YTM on new bonds should ________.
rise / fall
With regards to corporate bonds, ratings above ____ are investment grade.
BB
If “cap” refers to the market value of the company, then a stock with a market value of $3 billion is a _________.
Mid-cap corporation
A yield curve reflects debt instruments having the same ______ and the same _______.
tax status and quality
Yield curves illustrate term to maturity and yield to maturity (not coupon rate or nominal rate) for bonds of a given risk class. They represent a cross section of held for a category on bonds that are comparable in all respects but maturity.
Rank the following debt-type instruments in order from least to most risky, based solely on the interest rate risk.
Savings accounts or CDs
Tax-free Money Markets
Treasury Bonds
Money market mutual funds
T-bills
T-bills
Savings accounts or CDs
Money market mutual funds
Tax-free money markets
Treasury Bonds
Treasury bonds are last because of their long duration (most risky when interest rates rise).
An investor hold both callable and non-callable bonds with the same maturity and coupon. Under what circumstances will the duration of the bonds be approximately equal?
When the interest rates rise above the coupon rate
When interest rates rise above the coupon rate, the callable bonds will not be called. Issuers call bonds when rates fall because that lowers their interest costs.
With regards to debt instruments…..
The smaller the coupon, the ________ the relative price fluctuation.
The longer the term to maturity, the ________ the relative price fluctuation.
The lower the market interest rate, the ______ the relative price fluctuation
greater / greater / greater
To buy a 5% to 9% collar on LIBOR is to write a 9% _____ and write a 5% _____.
cap / floor.
The buyer will receive cash payment when LIBOR exceeds 9% and will make payments when LIBOR Is below 5%
If the stock market has a constant Beta of 1, a stock with a Beta of 2.0 is ________ than the overall market.
100% more volatile
The Dow Jones is _____ weighted.
Price
Technical analysts generally presume that when the stock breaks through a resistance level, it usually means the stock will go on to _______.
new high prices.
Dollar-weighted return can also be expressed by _______.
It measures changes in the total ______ of an investor’s position.
IRR
Dollar value
A bond issue with differing maturities is a _________.
serial bond issue.
Because of the nature of interest rates, differing maturities offer different interest rates.
A limit order transaction must wait for an acceptable price because this type of order is executable only at the _______.
Limit price or better
This means lower for a buy order and higher for a sell order. Some limit orders never execute.
A stop limit order activates a limit order when the market reaches the _______.
stop price
