Debt Securities

Question 1

Sinking fund

Answer 1

Stretch

Question 2

Reverse REPO

Answer 2

Banks lending money to fed, t-bills collateral

Question 3

T-bills

Answer 3

6 months or less, pays no interest, always issued at discount, Dutch auction, not quoted in 32nds

Money mkt instrument

Question 4

How are govt bonds quoted

Answer 4

32nds

Question 5

CDO

Answer 5

Collateralized debt obligation - backed by pool of loans, bonds, other debt, like credit cards or auto loans

Question 6

Eurobond

Answer 6

Foreign issuer
Foreign currency
Foreign country
Long term

Not registered with SEC

Question 7

YTM

Answer 7

(Annual interest + annual discount per year OR - annual premium per year)/ (purchase price + par value / 2)

Make sure to convert interest and annual disc/prem into dollars$$$

Also, the annual disc/prem is calculated from the purchase price

The bond could be bought at a prem or disc
The bond could be called at a prem or a disc

Question 8

YTC

Answer 8

See YTM, except annual discount or premium per year is adjusted to reflect only up to the earliest call date

Question 9

Term bonds

Answer 9

Issued same time, same maturity, quoted % of par, called randomly

Question 10

Step coupon bond

Answer 10

Start at a low coupon and step up at specific intervals

Question 11

Nominal yield

Answer 11

Quoted on bond, remains fixed, represents the fulcrum

Question 12

Eurodollars

Answer 12

US money invested in foreign banks, traded in NY and London

Question 13

GNMA

Answer 13

Ginni Mae - only direct obligation of Fed govt

Question 14

T-notes

Answer 14

1 - 10 year maturities

Question 15

Jumbo Cd

Answer 15

Min of $100k, $1mm common, negotiable, tradable, no fdic, has coupons and accrued interest

Question 16

LIBOR

Answer 16

Equivalent of effective fed funds rate for foreign banks, US dollars

Question 17

Convertible bond parity

Answer 17

Market price/conversion ratio

Question 18

T-bonds

Answer 18

10 - 30 year maturities

Question 19

Unsecured debt types

Answer 19

Debentures - standard full faith and credit

Income - no interest till company is profitable, think bankruptcy distressed debt

Question 20

Current yield

Answer 20

Annual interest/market price

Question 21

Refunding

Answer 21

Think refinancing of debt, new bonds issued to pay off old ones

Question 22

Balloon issue

Answer 22

Similar to serial, except more bonds mature in later years

Question 23

Eurodollar bond

Answer 23

Foreign OR domestic issuer
Issued oversees
Domestic currency
Short term
Principal and interest paid in US dollars
Traded in both US and foreign mkts

Not registered with SEC

Question 24

REPO

Answer 24

Repurchase agreement - loans secured with t-bills, usually overnight, up to 90 days, usually btwn fed and banks

Question 25

Serial bonds

Answer 25

Issued same time, equal amounts mature each year, quoted YTM

Question 26

Pre funded

Answer 26

Stretch

Question 27

T-strips

Answer 27

Pay no interest, issued at discount, not quoted in 32nds

Question 28

Accrued interest

Answer 28

Corps and munis based on 30 day month and 360 day year Govt bonds based on actual days in month and year Calculated from previous coupon date, up to but NOT including the settlement date

Question 29

Bankers acceptance

Answer 29

Similar to post dated check, used for import/export, no interest, issued at discount, time draft

Question 30

Effective fed funds rate

Answer 30

Average fed funds rate computed daily

Question 31

Zero coupon

Answer 31

Stretch

Question 32

Commercial paper

Answer 32

Unfunded, unsecured short term corporate debt, maturity less than 270 days,

Question 33

Series bond

Answer 33

Issued successive years with one maturity date

Question 34

Secured bond types

Answer 34

Mortgage bonds Equipment trusts Collateral trusts - stocks and bonds Guaranteed bonds - by parent company

Question 35

Describe the debt seesaw

Answer 35

Stretch

Question 36

Fed funds rate

Answer 36

Interest rate between BD's, banks and financial institutions, most volatile

Question 37

Convertible bond conversion ratio

Answer 37

Par/conversion price

Question 38

Cmo ads

Answer 38

Can't be compared to a any other security except cmo

Question 39

Auction rate securities

Answer 39

Stable prices | Variable rates

Question 40

Oid

Answer 40

Original issue discount Like t-bills