12 Questions
What is the purpose of the coupon payments made by the borrower to the bondholder?
To provide the bondholder with a regular fixed income
What is the relationship between the par value of a bond and the coupon rate?
The par value determines the coupon rate
How is the semi-annual coupon payment calculated?
By multiplying the par value of the bond by the annual coupon rate and dividing by 2
What happens to the bondholder when the bond matures?
The bondholder receives the final coupon payment and the par value of the bond
What is the significance of the bond trading at a price of 100?
The bond is trading at its face value or par
What is the most common bond denomination?
$1,000
What is the primary purpose of fixed-income securities?
To facilitate lending between investors and borrowers
Which of the following is NOT a common type of fixed-income security mentioned in the text?
Preferred stocks
What is the term used for the regular payments made from the issuer to the holder of a fixed-income security?
Coupons
What is one reason why corporations may issue fixed-income securities, according to the text?
To finance their operations and growth plans
What is the term used for the amount that the issuer of a fixed-income security promises to repay at maturity?
All of the above
Why might a corporation choose to borrow money through fixed-income securities?
To take advantage of leverage if they can earn a higher return than the cost of borrowing
Explore the concept of fixed-income securities, which are debt instruments issued by entities in the financial market. Learn about how these securities represent debt, provide fixed returns to investors, and the common types like government and corporate bonds.
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