WALL STREET PREP ACCOUNTING CRASH COURSE EXAM
|COMPLETE AND DETAILED QUESTIONS AND ANSWERS | REAL
EXAM QNA | 2025 LATEST UPDATED 100% RATED CORRECT | 100%
VERFIED | ALREADY GRADED A+|GUARANTEED TO PASS!!
What is the focus of the course? - (answer)analysis of debt
Where does demand for bonds come from? - (answer)Demand comes from governments,
corporations, and households.
What are Fixed income securities? - (answer)Fixed income securities: financial instruments that
require the borrower to pay a predetermined amount to the holder of the security in exchange for
capital upfront.
Example of a fixed income security - (answer)Example: a corporation needs to borrow
$5,000,000. Corporation will issue a fixed income security. Owners of securities, such as
investors, now have the right to receive predetermined amounts in exchange for giving that
$5,000,000 upfront.
What are the 2 broad types of debt? - (answer)Bonds and Loans
What do the government, households, and corporations use to borrow? - (answer)- Government
borrows primarily with bonds
- Corporations use primarily both
- Households: borrow with loans, which sometimes may get turned into securitized bonds
Debt from non-financial corporations - (answer)Non-financial corporations: The US is most
heavily weighted towards corporate bonds.
,Debt from households - (answer)Household debt: The US is most heavily weighted towards
securitization, while traditional bank loans dominate elsewhere.
What is securitization? - (answer)the procedure where an issuer designs a marketable financial
instrument by merging or pooling various financial assets into one group.
Who dominates the debt market? - (answer)The United States dominates the debt market
% of global Debt:
United States: 40%
Non-US Developed Countries: 46%
Emerging markets: 14%
Bullet bond - (answer)- Bond in which the principal repayment is made entirely at maturity.
- Also known as conventional or vanilla bond
- common for corporate + long term government bonds
Zero coupon bond - (answer)- a bond that pays no coupons over its maturity. Get all of money at
the end, rather than spread out throughout the amount of years
- Common for short term government bonds
annuity bond - (answer)- combines interest and principle to create even payments every period
- Typically issued by insurance companies as a retirement investment product as well as by
financing firms for mortgages and car loans
Notes - (answer)unsecured debt with original maturity less than 10 years
Face value / par value / future value - (answer)The price of the bond at the maturity date + the
interest for that year
,Coupon rate - (answer)amount of coupon / face value
Rate of return - (answer)- Total return = Future value / par value - 1
- Annual return = (Future value / par value)^1 / # of years - 1
Nominal yield - (answer)coupon / par value
Current yield - (answer)coupon / bond price
yield to maturity - (answer)the rate of return a bondholder will receive if the bond is held to
maturity
Premium - (answer)when bond is greater than par value
Discount - (answer)when bond is less than par value
Underwriting - (answer)having to pay banks who price and market the bond
Borrowers all in cost - (answer)The % cost to the borrower
Liquidity - (answer)a high volume of activity in a market
Primary market transaction - (answer)a loan directly between a lender and borrower
Secondary market transaction - (answer)the market where lenders (investors) trade previously
issued bonds amongst themselves
Bond Equivalent Yield - (answer)YTM x periods
, - most common way bond yields are discussed
- BEY ignores reinvestment
- BEY does not equal the true YTM because coupons received mid year can be reinvested
Effective annual yield - (answer)- true annual YTM is arrived by compounding, not simply
doubling. Resulting yield is the EAY
- EAY= (1 + YTM)^periods per year - 1
- EAY always larger than BEY for identical bonds (because of compounding)
Converting BEY to EAY - (answer)EAY = [(1 + BEY / n)^n - 1]
Bonds with maturity < 1 year - (answer)- predominantly zero coupon bonds and comprise the
money market
Money Market Instruments - (answer)CDs, treasury bills, commercial paper, repos
- used 360 day year NOT 365
Treasury bills and commercial paper - (answer)- issued at discount and pay par at maturity
CDs and repos - (answer)- issued at par and pay interest at maturity
Money market yield formula - (answer)FV = PV (1 + Money market yield aka interest rate x
time /360)
MMY is how interest is quoted for - (answer)- CDs, federal funds, repos, and more
- However, US treasury bills and commercial paper are quoted at discount to face value instead
of interest on present value
|COMPLETE AND DETAILED QUESTIONS AND ANSWERS | REAL
EXAM QNA | 2025 LATEST UPDATED 100% RATED CORRECT | 100%
VERFIED | ALREADY GRADED A+|GUARANTEED TO PASS!!
What is the focus of the course? - (answer)analysis of debt
Where does demand for bonds come from? - (answer)Demand comes from governments,
corporations, and households.
What are Fixed income securities? - (answer)Fixed income securities: financial instruments that
require the borrower to pay a predetermined amount to the holder of the security in exchange for
capital upfront.
Example of a fixed income security - (answer)Example: a corporation needs to borrow
$5,000,000. Corporation will issue a fixed income security. Owners of securities, such as
investors, now have the right to receive predetermined amounts in exchange for giving that
$5,000,000 upfront.
What are the 2 broad types of debt? - (answer)Bonds and Loans
What do the government, households, and corporations use to borrow? - (answer)- Government
borrows primarily with bonds
- Corporations use primarily both
- Households: borrow with loans, which sometimes may get turned into securitized bonds
Debt from non-financial corporations - (answer)Non-financial corporations: The US is most
heavily weighted towards corporate bonds.
,Debt from households - (answer)Household debt: The US is most heavily weighted towards
securitization, while traditional bank loans dominate elsewhere.
What is securitization? - (answer)the procedure where an issuer designs a marketable financial
instrument by merging or pooling various financial assets into one group.
Who dominates the debt market? - (answer)The United States dominates the debt market
% of global Debt:
United States: 40%
Non-US Developed Countries: 46%
Emerging markets: 14%
Bullet bond - (answer)- Bond in which the principal repayment is made entirely at maturity.
- Also known as conventional or vanilla bond
- common for corporate + long term government bonds
Zero coupon bond - (answer)- a bond that pays no coupons over its maturity. Get all of money at
the end, rather than spread out throughout the amount of years
- Common for short term government bonds
annuity bond - (answer)- combines interest and principle to create even payments every period
- Typically issued by insurance companies as a retirement investment product as well as by
financing firms for mortgages and car loans
Notes - (answer)unsecured debt with original maturity less than 10 years
Face value / par value / future value - (answer)The price of the bond at the maturity date + the
interest for that year
,Coupon rate - (answer)amount of coupon / face value
Rate of return - (answer)- Total return = Future value / par value - 1
- Annual return = (Future value / par value)^1 / # of years - 1
Nominal yield - (answer)coupon / par value
Current yield - (answer)coupon / bond price
yield to maturity - (answer)the rate of return a bondholder will receive if the bond is held to
maturity
Premium - (answer)when bond is greater than par value
Discount - (answer)when bond is less than par value
Underwriting - (answer)having to pay banks who price and market the bond
Borrowers all in cost - (answer)The % cost to the borrower
Liquidity - (answer)a high volume of activity in a market
Primary market transaction - (answer)a loan directly between a lender and borrower
Secondary market transaction - (answer)the market where lenders (investors) trade previously
issued bonds amongst themselves
Bond Equivalent Yield - (answer)YTM x periods
, - most common way bond yields are discussed
- BEY ignores reinvestment
- BEY does not equal the true YTM because coupons received mid year can be reinvested
Effective annual yield - (answer)- true annual YTM is arrived by compounding, not simply
doubling. Resulting yield is the EAY
- EAY= (1 + YTM)^periods per year - 1
- EAY always larger than BEY for identical bonds (because of compounding)
Converting BEY to EAY - (answer)EAY = [(1 + BEY / n)^n - 1]
Bonds with maturity < 1 year - (answer)- predominantly zero coupon bonds and comprise the
money market
Money Market Instruments - (answer)CDs, treasury bills, commercial paper, repos
- used 360 day year NOT 365
Treasury bills and commercial paper - (answer)- issued at discount and pay par at maturity
CDs and repos - (answer)- issued at par and pay interest at maturity
Money market yield formula - (answer)FV = PV (1 + Money market yield aka interest rate x
time /360)
MMY is how interest is quoted for - (answer)- CDs, federal funds, repos, and more
- However, US treasury bills and commercial paper are quoted at discount to face value instead
of interest on present value
