Basic bonds
what is the name for the money an investor loans when buying a bond?
Principal
What bonds are issued by national governments?
Government bonds.
What usually happens to bond prices when interest rates rise?
Bond prices usually fall.
What happens when a company cannot make bond payments?
Default
What bonds can be converted into company shares?
Convertible bonds
what is the date called when a bond must be repaid?
Maturity date
What bonds are issued by corporations?
Corporate bonds
What is the return earned on a bond called?
Yield
What risk reduces the purchasing power of bond returns?
Inflation risk
What bonds are designed to protect against inflation?
Inflation-linked bonds
what are regular interest payments on a bond called
Coupon payments
What bonds are issued by cities or local governments?
Municipal bonds
What term measures how sensitive a bond is to interest rate changes?
Duration
What risk involves difficulty selling a bond quickly?
Liquidity risk
What is a bond called when it sells above face value?
A premium bond
what type of investment is generally riskier than bonds?
Stocks
What bonds are backed by mortgages?
Mortgage-backed securities
What type of risk comes from rising interest rates?
Interest rate risk
What risk occurs when investors must reinvest at lower rates?
Reinvestment risk
What is a bond called when it sells below face value?
A discount bond
What type of investment is a bond considered to be?
A loan investment.
What are high-risk bonds with high yields called?
Junk bonds
What curve compares bond yields of different maturities?
The yield curve.
What usually happens to bond prices after a credit downgrade?
Bond prices usually fall
What strategy spreads bond investments across different maturity dates?
Bond laddering