FINA 3315 EXAM 2 COMPREHENSIVE STUDY
GUIDE 2026
◉ Callable Bonds.
Answer: Bonds that may be repurchased by the issuer at a specified
call price during the call period.
◉ Collateral.
Answer: A specific asset pledged against possible default on a bond.
◉ Convertible Bond.
Answer: A bond with an option allowing the bondholder to exchange
the bond for a specified number of shares of common stock in the
firm.
◉ Coupon Rate.
Answer: A bond's annual interest rate per dollar of par value.
◉ Credit Default Swap (CDS).
Answer: An insurance policy on the default risk of a corporate bond
or loan.
,◉ Current Yield.
Answer: Annual coupon divided by bond price.
◉ Debenture.
Answer: A bond not backed by specific collateral.
◉ Default Premium.
Answer: The increment to promised yield that compensates the
investor for default risk.
◉ Discount Bonds.
Answer: Bonds selling below par value.
◉ Expectations Hypothesis.
Answer: The theory that yields to maturity are determined solely by
expectations of future short-term interest rates.
◉ Face Value (Par Value).
Answer: The payment to the bondholder at the maturity of the bond.
◉ Floating-Rate Bonds.
, Answer: Bonds with coupon rates periodically reset according to a
specified market rate.
◉ Forward Rate.
Answer: The inferred short-term rate of interest for a future period
that makes the expected total return of a long-term bond equal to
that of rolling over short-term bonds.
◉ Horizon Analysis.
Answer: Analysis of bond returns over a multiyear horizon, based on
forecasts of the bond's yield to maturity and the reinvestment rate of
coupons./Forecast of bond returns based largely on a prediction of
the yield curve at the end of the investment horizon.
◉ Indenture.
Answer: The document of defining the contract between the bond
issuer and the bondholder.
◉ Investment Grade Bonds.
Answer: A bond rated BBB and above by Standard & Poor's or Baa
and above by Moody's.
◉ Liquidity Preferance Theory.
GUIDE 2026
◉ Callable Bonds.
Answer: Bonds that may be repurchased by the issuer at a specified
call price during the call period.
◉ Collateral.
Answer: A specific asset pledged against possible default on a bond.
◉ Convertible Bond.
Answer: A bond with an option allowing the bondholder to exchange
the bond for a specified number of shares of common stock in the
firm.
◉ Coupon Rate.
Answer: A bond's annual interest rate per dollar of par value.
◉ Credit Default Swap (CDS).
Answer: An insurance policy on the default risk of a corporate bond
or loan.
,◉ Current Yield.
Answer: Annual coupon divided by bond price.
◉ Debenture.
Answer: A bond not backed by specific collateral.
◉ Default Premium.
Answer: The increment to promised yield that compensates the
investor for default risk.
◉ Discount Bonds.
Answer: Bonds selling below par value.
◉ Expectations Hypothesis.
Answer: The theory that yields to maturity are determined solely by
expectations of future short-term interest rates.
◉ Face Value (Par Value).
Answer: The payment to the bondholder at the maturity of the bond.
◉ Floating-Rate Bonds.
, Answer: Bonds with coupon rates periodically reset according to a
specified market rate.
◉ Forward Rate.
Answer: The inferred short-term rate of interest for a future period
that makes the expected total return of a long-term bond equal to
that of rolling over short-term bonds.
◉ Horizon Analysis.
Answer: Analysis of bond returns over a multiyear horizon, based on
forecasts of the bond's yield to maturity and the reinvestment rate of
coupons./Forecast of bond returns based largely on a prediction of
the yield curve at the end of the investment horizon.
◉ Indenture.
Answer: The document of defining the contract between the bond
issuer and the bondholder.
◉ Investment Grade Bonds.
Answer: A bond rated BBB and above by Standard & Poor's or Baa
and above by Moody's.
◉ Liquidity Preferance Theory.
