02 Debt

Question 1

Bonds

income

bankruptcy

Answer 1

fixed income due to fixed interest

senior security - pays 1st in bankruptcy

Question 2

Corporate Debt is called

time horizon?

Answer 2

Funded Debt

matures 5 + years

Question 3

• Federal - Bills
• Federal - Notes
• Federal - Bonds

1. maturity
2. sold at
3. income source

Answer 3

1. < 1 year - usually 1mo - 6mo
2. Discount - minimum
3. No interest

Question 4

• Federal - Bills
• Federal - Notes
• Federal - Bonds

1. maturity
2. sold at
3. income source

Answer 4

1. 2-10 years
2. % of par
3. interest every 6 months

Question 5

• Federal - Bills
• Federal - Notes
• Federal - Bonds

1. maturity
2. sold at
3. income source

Answer 5

1. 10+ years
2. % of par
3. interest every 6 months

Question 6

Nominal / Coupon Rate

5% = ?

accrued ? paid ?

Answer 6

interest % of par

5% = $50

accrued daily paid semi-annually

Question 7

par / face value

Answer 7

$1,000

Question 8

5 M ABC J&J 15 8s of 09

1. Principal
2. Interest payment dates
3. Interest amount
4. Maturity date

Answer 8

1. $5,000
2. Jan & Jul 15
3. 8%
4. 2009

Question 9

Term

Serial

Balloon

Answer 9

one principal payment

portions of principal paid over time

part term part serial

Question 10

serial issues

Answer 10

issues spread over several yearss

Question 11

bonds are stated as

100 = what % & $

Answer 11

% of par

100 = 100% of par = 1,000

Question 12

point

basis point

Answer 12

Question 13

Calculate $ of point / bps

1 pt = ?$

1 bps = ?$

80 bps = ?$

Answer 13

Question 14

Grading Scales

Bank Investment Grade

Speculative Non-Investment Grade

Answer 14

S&P Moodys (mood swings)

Bank Investment Grade AAA Aaa

AA Aa

BBB Baa

Speculative Non-Investment Grade BB Ba

B B

C Ca

D D

Question 15

Rate the safety of investments

1st

2nd

3rd

Answer 15

1. Fed Govt
2. Fed Govt Agencies
3. Municipalities - GO - Gen Issue

Question 16

Risky Bonds

Safe to Risky

1.

2.

3.

4.

Answer 16

1. Secured - backed by collateral
2. Debtentures - not backed by collateral
3. Subordianted debentures
4. Income bonds - ony pay if enough $

Question 17

Debt Service

Answer 17

schedule of interest & principal pmts

Question 18

Redeemed

Answer 18

principal paid

Question 19

Sinking Fund

Answer 19

low rated issures dep $ to pay

Question 20

Bond Calls

1. Term
2. Serial

Answer 20

1. random lotto
2. longest to maturity 1st

Question 21

tendering

Answer 21

issuer offers to buy from mkt @ price they set

Question 22

call protection

Answer 22

fixed time issuer cannot call

Question 23

Bond Yeild Chart

Answer 23

Question 24

Nominal / Coupon Yeild (CY)

Answer 24

Int % of Par

Question 25

Current Yield (CY)

Answer 25

Question 26

Yield to Maturity (YTM)

Answer 26

Also called **basis**

Question 27

Yield Curve 1. Normal is ? 2. Long Maturity 3. Inverted means? 4. Inverted caused by?

Answer 27

1. 3% pts 2. greater yield 3. Long-term Int is lower than short-term int 4. investors buying long-term, selling short-term

Question 28

Yield Spread Recession Expansion

Answer 28

Question 29

Open-End Indentues

Answer 29

subsequestn issue on same collateral

Question 30

Closed-End Indentures

Answer 30

No sam class issue 2nd issue subordinate claim

Question 31

Prior Liens

Answer 31

precedence over 1st mortgate issue

Question 32

Closed End Covenant Open End Covenant

Answer 32

senior claim subsequent issue same property