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FINA-3315 Exam 2 Questions with Correct
Answers | Updated (100% Correct Answers)
Bond Answer: A security that obligates the issuer to make specified
payments to the holder over a period of time.
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.
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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.
© 2025 All rights reserved
FINA-3315 Exam 2 Questions with Correct
Answers | Updated (100% Correct Answers)
Bond Answer: A security that obligates the issuer to make specified
payments to the holder over a period of time.
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.
© 2025 All rights reserved
, 2
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.
© 2025 All rights reserved
