 The long term bonds issued by the
government are called Treasury bonds
 A bond with a face value of P1,000 that sells
for less than P1,000 in the market is called a
Discount bond
 These are corporate bonds where the coupon
can be adjusted at pre-determined intervals.
Floating rate note
 When the market’s required rate of return
for a particular bond is much less than its
coupon rate, the bond is selling at: Premium
 A low or deep/zero-discounted bond is a
Zero coupon bond
 A technique for determining the theoretical
fair value of a particular bond, including the
present and future value of its cash flows.
Bond valuation
 An investor or the owner of debt securities
that are typically issued by corporations and
governments are essentially lending money
to the bond issuer Bond holder
 The expected rate of return on a bond if
bought at its current market price and held to
maturity. Yield to maturity
 It is used to calculate the present value of a
bond? Yield to maturity
 A bond will sell at a discount when ____?
The coupon rate is less than the current yield
and the current yield is less than yield to
maturity
 The ___ feature allows the bondholder to
change each bond into a stated number of
shares of stock. Conversion
 Market price of the bond changes according
to which of the following reasons? All of the
above
 Which of the following statements is most
correct? All else equal, if a bond’s yield to
maturity increases, its price will fall
 The ___ feature permits the issuer to
repurchase bonds at a stated price prior to
maturity. Call
 The stated interest payment, in dollars, made
on a bond each period is called the bond’s
Coupon
 Call feature is a feature included in almost
all corporate bonds that allows the issuer to
repurchase bonds at the market price prior to
maturity. False
 Yield to maturity is the rate investors earn if
they buy the bond at a specific price and
hold it until maturity. True
 The volatility of the price of a bond is
measured by duration. True
 Bonds yields are influenced by interest-rate
expectations, the term in premium, credit
risk and liquidity. True
 Floating rate note has coupon rate that
moves in line with market rates. True
 Since a puttable bond gives it holder the
right to “put the bond” at specified times or
actions by the firm, the bond’s yield is lower
than that of a non-puttable bond. True
 In the valuation process, the higher the risk,
the greater the required return. True
 In a practical sense, the longer the term of a
bond, the greater the default risk associated
with the bond. TRUE
 A bond is said to sell at a premium when the
required return and the bond value fall
below the coupon interest rate and the par,
respectively. False
 A bond is said to sell at a premium when the
required return and the bond value fall
below the coupon interest rate and the par,
respectively. False
 There is an inverse relationship between the
quality or rating of a bond and the rate of
return it must provide bondholders. True
 When the bond value differs from par, the
yield to maturity will differ from the coupon
interest rate. True
 Debentures such as convertible bonds are
unsecured bonds that only credit worthy
firms can issue. True
 Dirty price is the price of a bond that ignores
any interest which may have accrued since
the last coupon payment. False
 Bonds are fixed income investments in
which an investor loans money to an entity
that borrows the funds for a defined period
of a time at a fixed interest rate. These are
essentially loan agreements between issuer
and an investor. True