Unit 4: Debt Securities

Question 1

When interest rates are flat, what bond sees high price volatility?

Answer 1

Convertible bonds

Question 2

Equity-Linked Notes (ELNs)

Answer 2

Debt instruments (unsecured) (credit risk)
Trade on exchanges
Help avoid loss (downside protection/forfeit upside)

Question 3

Premium Bonds (yield ladder)

Answer 3

Coupon, Current, YTM, YTC
(Decreasing–>)

Question 4

Discount Bonds (yield ladder)

Answer 4

Coupon, Current, YTM, YTC
(Increasing–>)

Question 5

Speculative Bonds

Answer 5

Lower rating
Below BBB rating (S&P)