Different kinds of bonds and bond features. Bond rating: BBB is the cutoff for investment-grade vs...

 

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Different kinds of bonds and bond features. Bond rating: BBB is the cutoff for investment-grade vs high-yield bonds. Bond's provisions: sinking fund provision, call provision, and conversion provision. The relationship between coupon rate, market interest rate (yield to maturity), and bond price. Under what condition will bond price be sold at par, premium, and discount? When bond is approaching maturity, what happens to its price? Definition of YTM There is an inverse relationship between bond price and yield to maturity (or market interest rate). Long-maturity bond and low-coupon bond are riskier than short-maturity bond and high-coupon bond. Bond strategies. If expecting interest rates to decline, buy lower-coupon (preferably zero- coupon) and longer-maturity bonds. If rates are expected to rise, buy higher-coupon and shorter- maturity bonds. What are the determinants of the nominal interest rate? Real interest rate, inflation premium, default risk premium, liquidity premium, and maturity risk premium. Which risk premium determines the gap between two yield curves? Under what economic condition will the yield curve be upward-, downward- (or inverted) sloping? Different kinds of bonds and bond features. Bond rating: BBB is the cutoff for investment-grade vs high-yield bonds. Bond's provisions: sinking fund provision, call provision, and conversion provision. The relationship between coupon rate, market interest rate (yield to maturity), and bond price. Under what condition will bond price be sold at par, premium, and discount? When bond is approaching maturity, what happens to its price? Definition of YTM There is an inverse relationship between bond price and yield to maturity (or market interest rate). Long-maturity bond and low-coupon bond are riskier than short-maturity bond and high-coupon bond. Bond strategies. If expecting interest rates to decline, buy lower-coupon (preferably zero- coupon) and longer-maturity bonds. If rates are expected to rise, buy higher-coupon and shorter- maturity bonds. What are the determinants of the nominal interest rate? Real interest rate, inflation premium, default risk premium, liquidity premium, and maturity risk premium. Which risk premium determines the gap between two yield curves? Under what economic condition will the yield curve be upward-, downward- (or inverted) sloping?

Answer rating: 100% (QA)

Different kinds of bonds and bond features 1 Government bonds Issued by national governments to finance their activities 2 Corporate bonds Issued by corporations to raise capital for various purposes ... View the full answer