If an investor is concerned about interest risk, which of the following bonds should a registered rep recommend? T-notes T-bonds T-strips T-bills
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- What is interest rate risk, and how does it relate to callable bonds? Explain using an example of your own choosing.different types of risk that bond investors and issuers face, and discuss how a bond’s terms and collateral can be changed to affect its interest rateDescribe the process to record a bond a face value, discount value and premium?
- Which type of bond- a mortgage bond, a debenture, or a subordinated debenture- generally has the a. Highest cost to the bond issuer? B. least risk to the bond holder? c. highest yield to the bond holder?Explain the use of a sinking-fund provision. How can it reduce the investor’s risk? What are protective covenants? Why are they needed? Explain the use of call provisions on bonds. How can a call provision affect the price of a bond? Explain the use of bond collateral, and identify the common types of collateral for bonds. What are debentures? How do they differ from subordinated debentures? What is a bond indenture? What is the function of a trustee with respect to the bond indenture? What are the advantages and disadvantages to a firm that issues low- or zero-coupon bonds?Default risk on bonds can be evaluated by using:A. financial analysisB. bond ratingsC. estimates of potential losses on bondsD. a and b
- Identify and discuss the risks which affect the returns of the bond investor .Include relevent illustrationsBonds have several unique terms and features. Required: BRIEFLY describe or provide example(s) of the following bond terms and features: A. Put bonds B. Protective covenants C. Sinking fundA legal document that details the rights of bondholders and the issuer is called . If the legal document just described includes a sinking fund provision, is the bond considered to have more or less default risk, all else being equal? More default risk Less default risk You can distinguish the various types of bonds by their terms of contract, pledge of collateral, and so on. Identify the type of bond based on each description given in the table that follows: Description Type of Bond These bonds are backed by real estate holdings and equipment, and if a company goes bankrupt, the collateral can be sold off to compensate for the default. These bonds, more so than other collateralized securities, have prior claims over assets. These bonds are not backed by any physical collateral. They are backed by the reputation and creditworthiness of the issuing company. These bonds are considered the riskiest of all corporate bonds and thus…
- In regard to a bond discount or premium, what is the effective-interest amortization method?In general, If you consider investing a bond, how is the issuer and guarantor information relevant for the value of this bond?Which of the following best describes a bond? Short-term debt security Long-term debt security Short-term equity security Long-term equity security