FNCE 2820 Test with Questions with Verified
Answers | Already Passed
Introduction to bonds (aka fixed income) - ✔✔Bonds = you are loaning someone money
- in return you get a promise to get paid (normally semi-annually) interest payments
Bonds - ✔✔maturity : how many years/months the loan is
coupon rate : how much interest the bond pays you
market price : current price of a bond
- bonds are typically issued in nominal values of $1000 per bond
Bonds and credit - ✔✔The higher the credit quality = the lower rate
default risk = chance that they may not pay you back
- higher the default risk the higher the coupon rate desired
US Treasuries - ✔✔key benchmark
Bond Types - ✔✔Safest : Treasuries / Federal / US government
THEN MUNI bonds
Bond Types cont. - ✔✔Riskiest : international and high yield bonds
Bonds value in diversification - ✔✔When stocks do poorly bonds typically do well
Why bonds? - ✔✔1. Fixed income
2. Less risky than stocks
, - capital preservation
Bond concepts and terms - ✔✔How is a bond different from a stock? A bond is a loan, a
stock is a share/equity
Premium - ✔✔when rates go down, then your original bond is worth more (higher coupon
than the market)
Payment at maturity - ✔✔FACE VALUE - almost always 1000. you always get back the
beginning amount that you purchased the bond for
Bond insurance if bond defaults - ✔✔paid for by city/state/corporation
Bond concepts and terms - ✔✔after tax rate of return = tax equivalent yield
= bond yield * ( 1 - tax rate)
compare similar bonds after tax
How to pick a credit card - ✔✔1. Know what your personal needs are based on your credit
score
3 general types of credit cards - ✔✔1. Cards that help you improve your credit when it's
limited (student) or damaged (because of late payments)
2. Cards that charge a low amount of interest (as small of a payment as possible)
3. Cards that earn perks or rewards (travel, cash back, whatever best meets your needs)
if you have a lot of debt - ✔✔- want a card that charges a low amount of interest
Things that can bring up your credit score - ✔✔1. borrowed money and used the purchased
asset as collateral
Answers | Already Passed
Introduction to bonds (aka fixed income) - ✔✔Bonds = you are loaning someone money
- in return you get a promise to get paid (normally semi-annually) interest payments
Bonds - ✔✔maturity : how many years/months the loan is
coupon rate : how much interest the bond pays you
market price : current price of a bond
- bonds are typically issued in nominal values of $1000 per bond
Bonds and credit - ✔✔The higher the credit quality = the lower rate
default risk = chance that they may not pay you back
- higher the default risk the higher the coupon rate desired
US Treasuries - ✔✔key benchmark
Bond Types - ✔✔Safest : Treasuries / Federal / US government
THEN MUNI bonds
Bond Types cont. - ✔✔Riskiest : international and high yield bonds
Bonds value in diversification - ✔✔When stocks do poorly bonds typically do well
Why bonds? - ✔✔1. Fixed income
2. Less risky than stocks
, - capital preservation
Bond concepts and terms - ✔✔How is a bond different from a stock? A bond is a loan, a
stock is a share/equity
Premium - ✔✔when rates go down, then your original bond is worth more (higher coupon
than the market)
Payment at maturity - ✔✔FACE VALUE - almost always 1000. you always get back the
beginning amount that you purchased the bond for
Bond insurance if bond defaults - ✔✔paid for by city/state/corporation
Bond concepts and terms - ✔✔after tax rate of return = tax equivalent yield
= bond yield * ( 1 - tax rate)
compare similar bonds after tax
How to pick a credit card - ✔✔1. Know what your personal needs are based on your credit
score
3 general types of credit cards - ✔✔1. Cards that help you improve your credit when it's
limited (student) or damaged (because of late payments)
2. Cards that charge a low amount of interest (as small of a payment as possible)
3. Cards that earn perks or rewards (travel, cash back, whatever best meets your needs)
if you have a lot of debt - ✔✔- want a card that charges a low amount of interest
Things that can bring up your credit score - ✔✔1. borrowed money and used the purchased
asset as collateral
