Click here for more: Scholars nexus
FINC 3610- Exam 2 Questions with Detailed Verified
Answers
annuity Ans: ✓ ✓ ✓ finite series of equal payments that occur at regular intervals
ordinary annuity Ans: ✓ ✓ ✓ first payment occurs at the end of the period
annuity due Ans: ✓ ✓ ✓ first payment occurs at the beginning of the period
perpetuity Ans: ✓ ✓ ✓ infinite series of equal payments
effective annual rate (EAR) Ans: ✓ ✓ ✓ actual rate paid (or received) after accounting for
compounding that occurs during the year
used for comparisons between different compounding periods
APR Ans: ✓ ✓ ✓ annual rate quoted by law
period rate times the number of periods per year
APR/ number periods per yr
coupon Ans: ✓ ✓ ✓ the stated interest payment made on a bond
face value Ans: ✓ ✓ ✓ the principal amount of a bond that is repaid at the end of the term. also
called par value
coupon rate Ans: ✓ ✓ ✓ the annual coupon divided by the face value of a bond
maturity Ans: ✓ ✓ ✓ the specified date on which the principal amount of a bond is paid
yield to maturity (YTM) Ans: ✓ ✓ ✓ the rate required in the market on a bond
coupon > YTM Ans: ✓ ✓ ✓ price > par
premium
© Get it right 2025 Getaway - Stuvia US All rights reserved
, Click here for more: Scholars nexus
coupon< YTM Ans: ✓ ✓ ✓ price < par
discount
indenture Ans: ✓ ✓ ✓ the written agreement between the corporation and the lender detailing
the terms of the debt issue
registered form Ans: ✓ ✓ ✓ the form of bond issue in which the registrar of the company records
ownership of each bond; payment is made directly to the owner of record
bearer form Ans: ✓ ✓ ✓ the form of bond issue in which the bond is issued without record of the
owner's name; payment is made to whomever holds the bond
debenture Ans: ✓ ✓ ✓ an unsecured debt, usually with maturity of 10 years or more
note Ans: ✓ ✓ ✓ unsecured debt, usually with a maturity under 10 years
sinking fund Ans: ✓ ✓ ✓ an account managed by the bond trustee for early bond redemption
zero coupon bonds Ans: ✓ ✓ ✓ a bond that makes no coupon payments and is thus initially priced
at a deep discount
real rates Ans: ✓ ✓ ✓ interest rates or rates of return that have been adjusted for inflation
nominal rates Ans: ✓ ✓ ✓ interest rates or rates of return that have not been adjusted for inflation
inflation premium Ans: ✓ ✓ ✓ the portion of a nominal interest rate that represents compensation
for expected future inflation
interest rate risk premium Ans: ✓ ✓ ✓ the compensation investors demand for bearing interest
rate risk
default risk premium Ans: ✓ ✓ ✓ the portion of a nominal interest rate or bond yield that
represents compensation for the possibility of default
taxability premium Ans: ✓ ✓ ✓ the portion of.a nominal interest rate or bond yield that represents
compensation for unfavorable tax status
liquidity premium Ans: ✓ ✓ ✓ the portion of a nominal interest rate or bond yield that represents
compensation for lack of liquidity
© Get it right 2025 Getaway - Stuvia US All rights reserved
FINC 3610- Exam 2 Questions with Detailed Verified
Answers
annuity Ans: ✓ ✓ ✓ finite series of equal payments that occur at regular intervals
ordinary annuity Ans: ✓ ✓ ✓ first payment occurs at the end of the period
annuity due Ans: ✓ ✓ ✓ first payment occurs at the beginning of the period
perpetuity Ans: ✓ ✓ ✓ infinite series of equal payments
effective annual rate (EAR) Ans: ✓ ✓ ✓ actual rate paid (or received) after accounting for
compounding that occurs during the year
used for comparisons between different compounding periods
APR Ans: ✓ ✓ ✓ annual rate quoted by law
period rate times the number of periods per year
APR/ number periods per yr
coupon Ans: ✓ ✓ ✓ the stated interest payment made on a bond
face value Ans: ✓ ✓ ✓ the principal amount of a bond that is repaid at the end of the term. also
called par value
coupon rate Ans: ✓ ✓ ✓ the annual coupon divided by the face value of a bond
maturity Ans: ✓ ✓ ✓ the specified date on which the principal amount of a bond is paid
yield to maturity (YTM) Ans: ✓ ✓ ✓ the rate required in the market on a bond
coupon > YTM Ans: ✓ ✓ ✓ price > par
premium
© Get it right 2025 Getaway - Stuvia US All rights reserved
, Click here for more: Scholars nexus
coupon< YTM Ans: ✓ ✓ ✓ price < par
discount
indenture Ans: ✓ ✓ ✓ the written agreement between the corporation and the lender detailing
the terms of the debt issue
registered form Ans: ✓ ✓ ✓ the form of bond issue in which the registrar of the company records
ownership of each bond; payment is made directly to the owner of record
bearer form Ans: ✓ ✓ ✓ the form of bond issue in which the bond is issued without record of the
owner's name; payment is made to whomever holds the bond
debenture Ans: ✓ ✓ ✓ an unsecured debt, usually with maturity of 10 years or more
note Ans: ✓ ✓ ✓ unsecured debt, usually with a maturity under 10 years
sinking fund Ans: ✓ ✓ ✓ an account managed by the bond trustee for early bond redemption
zero coupon bonds Ans: ✓ ✓ ✓ a bond that makes no coupon payments and is thus initially priced
at a deep discount
real rates Ans: ✓ ✓ ✓ interest rates or rates of return that have been adjusted for inflation
nominal rates Ans: ✓ ✓ ✓ interest rates or rates of return that have not been adjusted for inflation
inflation premium Ans: ✓ ✓ ✓ the portion of a nominal interest rate that represents compensation
for expected future inflation
interest rate risk premium Ans: ✓ ✓ ✓ the compensation investors demand for bearing interest
rate risk
default risk premium Ans: ✓ ✓ ✓ the portion of a nominal interest rate or bond yield that
represents compensation for the possibility of default
taxability premium Ans: ✓ ✓ ✓ the portion of.a nominal interest rate or bond yield that represents
compensation for unfavorable tax status
liquidity premium Ans: ✓ ✓ ✓ the portion of a nominal interest rate or bond yield that represents
compensation for lack of liquidity
© Get it right 2025 Getaway - Stuvia US All rights reserved
