Bond Prices
Bond Yields
The Bond Market
The Determination of Interest Rates
Bond Risk
100

What is the most straightforward type of bond?

U.S. Treasury Bills

100

it is the amount returned to the bondholders if they held the bond until its maturity

Yield to maturity

100

What refers to the length of time an investor plans on holding an asset?

investment horizon 

100

When determined that interest rates will increase and so bond prices ________

decreases

100

The probability that a borrower will not repay a loan.

Default Risk


200

A promise to pay the face value of the bond without a coupon payment (Ex. Treasury Bills).

zero-coupon bond

200

What is the formula to calculate current yield?

Yearly coupon payment/Price paid

200

What is the name of the curve which there is a relationship between price and the quantity of bonds that investors demand?

The bond demand curve

200

If an economy in a country is going through a recession, the interest rates tend to _______.

fall

200

____________ has a probability of rising or decline over the years, it can affect the bond's price

Interest rate risk

300

How much will a one year treasury bill pay out? Its face value is $100, with an annual interest of 0.05.

$95.24

300

What is the definition of a return from purchasing and selling a bond?

holding period return

300

The higher the price of a bond, the larger the quantity supplied will be. How is it called the curve affected by this change?

The bond supply curve 

300

Interest rates move in response to __________.

Expected inflation 

changes in general business conditions

300

What possible risks are there related to bonds?

Default risk

Inflation risk

Interest rate risk

400

How long do you have to hold on to a treasury bill with a face value of $100 and an annual interest rate of 5%, so it pays out $97.59?

6 months

400

Two possible results when a bond price changes?

Capital gain

Capital loss

400

_____________ is when the bond market achieve a point at supply equals demand. 

Equilibrium 

400

The ______________ of interest rates is the relationship between the level of bond yields to the maturity of the bonds. 

term structure 
400

The risk the real value of the payments from owning a bond will be different from what was expected; that the real interest rate on a bond will differ from what was expected.

Inflation Risk

500

What are the four types of bonds?

Zero-coupon rate or Discount bond

Fixed-Payment loan

Coupon Bond

Consol

500

What happens if face value is greater than bond price?

Yield to maturity is greater than current yield is greater than coupon rate

500

What are the three factors that can be identified as shifting the supply curve and changing the quantity of bonds supplied at a provided price?

Changes in government borrowing 

General business conditions 

Expected Inflation

500

Changes in  ______________ are about to fall, bond prices are presume to rise. 

Expected Interest Rates 

500

The cost of borrowing can be lower by the efficiency of markets used in securitization. Provide 2 of the 5 ways of diminishing it. 

Diversification of risk or risk-spreading 

Creating Liquidity 

Fostering specialization 

Broadening markets

Promoting innovation

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