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Series 7 > Chapter 2 : Debt Securities > Flashcards

Chapter 2 : Debt Securities Flashcards

Debt Securities (54 cards)

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1
Q

Bonds

A

DO NOT REPRESENT OWNERSHIP
Represent debt obligation

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2
Q

Par Value Bond

A

1000

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3
Q

Interest Rate Bond

A

Same as Coupon Rate
Fixed rate percentage of par value

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4
Q

Bond Interest is Paid (how often)

A

Semi Annually

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5
Q

One Point of a bond is?

A

$10

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6
Q

Maturity Date =

A

Date a bond becomes due for repayment

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7
Q

Discount / Par / Premium

A

Less 1000
@1000
More 1000

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8
Q

Series Bonds

A

Different issue dates usually same maturity date

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9
Q

Term Bonds

A

Entire issue of bonds have the same maturity date

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10
Q

Serial Bonds

A

One issue date , Staggered maturity date(s)

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11
Q

Balloon Maturity

A

Large amount comes due near or on final maturity date

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12
Q

Bond Ratings

A

AAA Investment Grade
AA
A

BBB Speculative Grade
BB
B
CCC
CC
C
DDD
DD

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13
Q

AM Best

A

Rates insurance companies

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14
Q

Bond Taxation

A

Corporate Level
Fed State Local
Government
Fed
Municipal
Tax Free

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15
Q

Maturities Length

A

Short
1-3 Years
Medium
4-10 Years
Long
10+ Years

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16
Q

Discount Par Premium

A

Discount
Yield > Coupon
Par
Yield = Coupon
Premium
Yield < Coupon

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17
Q

Nominal Yield

A

= Coupon Rate

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18
Q

Current Yield

A

= Actual Income

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19
Q

Yield to maturity or basis

A

= Long Term Yield

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20
Q

Current Yield
Calculation

A

Annual Int / Market Price
Example
9% Bond @90
90/900 = 10%

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21
Q

Market Price Rises

A

Yield To Maturity goes
DOWN

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22
Q

Market Price Lowers

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A

Yield to Maturity goes
UP

23
Q

Bonds are fixed income because of

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A

Interest Rate

24
Q

Interest Rises

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A

Outstanding bonds Lower
Inverse Reaction

25
Interest Lowers
Outstanding bonds Rise Inverse Reaction
26
Bond Basis Point
1/100th of a point 0.01% 1% Change is 100 Basis Points
27
Discount
Basis (YTM) Higher than coupon rate Yield > CP
28
Premium
Basis (YTM) Lower than coupon rte Yield < CP
29
Par
Basis (YTM) Same as coupon rate Yield = CP
30
Short Term
Quickest Reaction to Interest Rate Safest
31
Long Term
Greatest Reaction to Interest Rate Riskier
32
Bonds M Meaning
M = 1000 5M Bonds = 5000 worth of bonds
33
Bond Quote
6s of 28 @ 109 6% Coupon Rate Maturity Date 2028 Dollar Price = 109
34
Accrued Interest
Amount of interest built up since last interest payment
35
Claculating Bond Interest when buying a bond
Current MP + Accrued Interest Calculated 30 Day Month / 360 Day Year Paid up to but not including the settlement date 1st and 15th of the month 1st= 30 Days 15th = 16 Days
36
Accrued Interest Appears for Both Buyer and Sellers
Added to the amount the buyer pays Added to the amount the seller receives
37
Fundemental Corporate Bonds
Paid Semi Annually Fully Taxable = Fed State & Local Dealer / Principle Transaction
38
Leveraged Buyout
Takeover using borrowed funds
39
Spin Off
Subsidiary of a company becomes its own company
40
Holding Company
Owns enough voting shares to have an influence
41
Secured Bond
Secured by collateral
42
Mortgage Bonds
Secured by real property
43
Closed End Mortgage Bonds
Property cannot be used as collateral for future loans unless subsequent loans lesser in claim
44
Open End Mortgage Bonds
Property can be used as collateral. All debt holds equal claim More risk = higher reward
45
General Mortgage Bond
Pledge all assets no specific lots named
46
Equipment Trust Certificate
Not Callable Serial form Rarely default
47
Guarenteed / Parity Bond
Guarenteed by company other than issuer Parity = Equal Claim and Rights
48
Debenture
Backed by good faith and credit Unsecured with NO COLLATERAL
49
Subordinated Debenture
Holds lesser claim
50
Income / Junk / Fallen Angel Bonds
Risky Lack of Credit Higher Coupon Rate
51
Low Quality Bonds Offer?
Higher Yield Lower Price
52
Hight Quality Bonds Offer?
Lower Yield Higher Price
53
Income or Adjustment Bonds
Considered Risky Investment Called adjustment when used in corporate reorganization
54
Zero Coupon Bond
Sold at deep discount Pays No interest while outstanding One lump sum payout at maturity which includes initial investment and imputed interest Phantom income = taxed annually based on value even though no income Most Volatile Fixed Income Security

Series 7 (3 decks)

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