Quiz 3

Question 1

What is a bond?

Answer 1

A form of interest only bond

Question 2

Face (Par) Value

Answer 2

Principal amount paid when the bond matures

Question 3

Coupon

Answer 3

invest payment

Question 4

Coupon Rate

Answer 4

Some percentage of par value

Question 5

Maturity

Answer 5

Date when principal amount is to be paid

Question 6

Yield to Maturity

Answer 6

The discount rate used to value a bond, going rate on the market for bonds of similar risk

Question 7

How do you value a bond?

Answer 7

PV coupons + PV par or PV annutiy + PV lump sum

Question 8

What is the indenture?

Answer 8

Basic terms of the bonds

Question 9

Security

Answer 9

Collateral – secured by financial securities
Mortgage – secured by real property, normally land or buildings
Debentures – unsecured
Notes – unsecured debt with original maturity less than 10 years

Question 10

Seniority

Answer 10

Your ranking of when you get your bond`

Question 11

Repayment

Answer 11

Sinking fund

Question 12

Call premium

Answer 12

permit the security issuer to redeem the securities before they mature.

Question 13

Deferred Call

Answer 13

permit the security issuer to redeem the securities before they mature.

Question 14

Treasury Securities

Answer 14

= Federal government debt

Question 15

Treasury Bills (T-bills)

Answer 15

Pure discount bonds

The original maturity of one year or less

Question 16

Treasury notes

Answer 16

Coupon debt

Original maturity between one and ten years

Question 17

Treasury bonds

Answer 17

Coupon debt

Original maturity greater than ten years

Question 18

2 main bond rating agencies

Answer 18

Moody and Standard & Poor’s

Question 19

Investment grade

Answer 19

AAA Best Quality
AA High Quality
A Upper Medium Grade
BBB Medium Grade

Question 20

Junk

Answer 20

Below investment grade (Starts at BB - Speculative)

Question 21

Debenture

Answer 21

a type of debt instrument that is not secured by physical assets or collateral
Ex. T-Bills and T-Bonds

Question 22

Zero coupon bond

Answer 22

A bond in which no periodic coupon is paid over the life of the contract. Instead, both the principal and the interest are paid at the maturity date. Pays no interest

Question 23

Floating-rate bond

Answer 23

Variable interest rate

Question 24

Plain vanilla bond

Answer 24

Fixed interest rate

Question 25

Convertable bond

Answer 25

is one way for a company to minimize negative investor interpretation of its corporate actions. Read more: Convertible Bond https://www.investopedia.com/terms/c/convertiblebond.asp#ixzz5AJS6e3M1 Follow us: Investopedia on Facebook

Question 26

Put Bond

Answer 26

A put bond is a bond that allows the bondholder to force the issuer to repurchase the security at specified dates before maturity.

Question 27

Realized Yield

Answer 27

The yield you actually earn for the period in which you hold a bond. Calculated when you sell a bond before its maturity date

Question 28

Common Stock

Answer 28

Equity without priority for dividends or in bankruptcy

Question 29

Cumulative voting

Answer 29

A procedure in which a shareholder may cast all votes for one member of the board directors

Question 30

Straight voting

Answer 30

A procedure in which a shareholder may cast all votes for each member of the board of directors - freezes out minority shareholders as the majority has control over who gets elected

Question 31

Staggered voting

Answer 31

only a fractured of the directorships are up for election at a particular time

Question 32

Proxy voting

Answer 32

A grant of authority by a shareholder allowing another individual to vote on behalf of that shareholder

Question 33

Classes of stock

Answer 33

companies may have different classes of stock, typically created with unequal voting rights (Class A vs. Class B)

Question 34

Preferred Stock

Answer 34

Stock with dividend priority over common stock, normally with a fixed dividend rate, sometimes without voting rights

Question 35

Primary Market

Answer 35

The market in which new securities are originally sold to investors

Question 36

Secondary Market

Answer 36

The market in which previously issued securities are traded among investors

Question 37

Dealers

Answer 37

An agent who buys and sells securities from inventory bid price vs. ask price (car dealer)

Question 38

Broker

Answer 38

An agent who arranges security transactions among investors - earns a commission (real estate agent)