Principles of Finance · free preview
Characteristics of Bonds
A bond is a debt security promising periodic coupon payments and a face value at maturity, its basic terms define the claim precisely, and government, corporate, and other bond types differ in issuer, risk, and tax treatment.
1. The bond as a loan, packaged
The bond as a loan, packaged
2. Government bonds
Government bonds
3. Corporate bonds and the risk spectrum
Corporate bonds and the risk spectrum
4. Bonds compared with stocks
Bonds compared with stocks
5. The bond's two payment streams
Which pair of payment streams does a standard bond contract promise its holder?
6. Reading the coupon
A bond carries a 6 percent coupon on 1,000 dollars of face value, paid semiannually. What is each coupon payment?
7. Treasury bills, notes, and bonds
How do US Treasury bills, notes, and bonds differ from one another?
8. The municipal tax feature
Why do municipal bonds typically pay lower yields than corporate bonds of similar maturity?
9. Investment grade versus high yield
What distinguishes investment-grade corporate bonds from high-yield bonds?
10. Bondholder versus stockholder
In a liquidation, why do bondholders get paid before stockholders?
11. The contract's name
What nine-letter term names the formal legal contract between a bond issuer and its lenders? Answer in lowercase.
12. The annual interest percentage
What two-word term names the stated annual interest rate on a bond's face value that sets each coupon? Answer in lowercase.
13. The below-investment-grade label
What four-word informal term names bonds rated below investment grade, reflecting their high default premium? Answer in lowercase.
14. The collateral-free corporate bond
What one-word term names an unsecured corporate bond resting on the issuer's general credit? Answer in lowercase.
Practice this interactively
Free account · instant grading · spaced review that schedules itself.
Start this course for free