Chapter 2 & 4 (5 questions) Flashcards
Characteristics of Fixed Income (67 cards)
Issued in amounts of $100,000 to $1 million
characteristic of negotiable jumbo CDs
general creditors and, as such, have prior claim only over ______.
equity holders.
If an investor pays 95.28 for a Treasury bond, how much did the bond cost?
$958.75
A bond with a par value of $1,000 and a coupon rate of 6% paid semiannually is currently selling for $1,200. The bond is callable in 15 years at 105. In the computation of the bond’s yield to call, which of these would be a factor?
Interest payments of $30
which specific risk is avoided when a U.S. resident purchases a Eurodollar bond?
Currency risk- Eurodollar bonds are denominated in dollars; therefore, no currency risk exists for a U.S. resident.
A Public Library is most likely to be funded with a ________ rather than a revenue bond
General Obligation Bond (backed by taxes)
Hospitals, airports, and golf courses all generate revenue and can be financed with __________ bond issues
revenue bond issues
True or False:
Coupon rates are usually higher than nonconvertible bond rates of the same issuer.
False
_______are always interest bearing and issued at par or face value.
CDs
most significant characteristic of municipal bonds for investors is
their exemption from federal income tax.
The current yield on a bond with a coupon rate of 7.5% currently selling at 105½ is approximately
7.11%.
____= Annual Interest/Bond Market Price
Current Yield
Current Yield
Annual Interest/Bond Market Price
A TIPS bond is issued in the principal amount of $1,000, paying 3.5%. Over the security’s 5-year term, the annual inflation rate is 6%. What is the principal value of the bond at the end of 4 years?
$1,267
the owner of a convertible debt issue
is a creditor of the issuer.
Debt Instrument that presents low default risk
Municipal general obligation bonds & anything issued by the United States Government
benefits of adding foreign debt securities to an investor’s portfolio is
potentially higher yields.
An investor purchasing 10 corporate bonds at a price of 102¼ each will pay
$10,225.00.
True or False: U.S Government Agency Securities offer higher yields than direct U.S. obligations
TRUE
the advantages to investing in Brady bonds over those issued by countries classified as emerging economies is
short maturities
When a company uses the securities of one subsidiary to collateralize a bond issue of another subsidiary, the bonds are known as _____________________.
collateral trust certificates.
Par is always 1000 shares. The bond’s value is based on that. if the market price is $800 value, then that is 80% of Par. To Calculate _________, you divide Par by the given stock price, then divide the Current Value by that variable.
PARITY
Coupon X (1-Tax Bracket)
after tax yield
Tax-Equivalent Yield
Coupon X (1-Tax Bracket)