Lecture 4

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0 [{"id":1390433,"quiz_id":"85326","answer_id":null,"answerType_id":"1","created_at":"2021-10-04 03:02:04","updated_at":"2021-10-04 07:30:37","questionName":"What are bonds","questionTimeSeconds":"0","questionTimeMinutes":"1","questionImagePath":null,"position":0,"explanation":"","question_score_id":null,"lang":"","questionAudioPath":null},{"id":1390449,"quiz_id":"85326","answer_id":null,"answerType_id":"0","created_at":"2021-10-04 03:43:43","updated_at":"2021-10-04 07:30:37","questionName":"Will the failure of meeting the sinking fund provision constitute a default?","questionTimeSeconds":"0","questionTimeMinutes":"1","questionImagePath":null,"position":9,"explanation":"Sinking fund provisions are considered to be mandatory payments. Firms which fails to fulfill mandatory payments will thus be considered to have defaulted.","question_score_id":null,"lang":"","questionAudioPath":null},{"id":1390443,"quiz_id":"85326","answer_id":null,"answerType_id":"0","created_at":"2021-10-04 03:17:24","updated_at":"2021-10-04 07:30:37","questionName":"What is call provision","questionTimeSeconds":"0","questionTimeMinutes":"1","questionImagePath":null,"position":4,"explanation":"","question_score_id":null,"lang":"","questionAudioPath":null},{"id":1390448,"quiz_id":"85326","answer_id":null,"answerType_id":"0","created_at":"2021-10-04 03:41:54","updated_at":"2021-10-04 07:30:37","questionName":"Do firms generally have to pay call premium on when they choose to call bonds by the sinking funds provision?","questionTimeSeconds":"0","questionTimeMinutes":"1","questionImagePath":null,"position":8,"explanation":"Bonds called by the sinking funds provision need not be paid with call premiums, as most sinking fund provisions do not have call premiums. However, only a small percentage of bonds is eligible to be called every year.","question_score_id":null,"lang":"","questionAudioPath":null},{"id":1390442,"quiz_id":"85326","answer_id":null,"answerType_id":"1","created_at":"2021-10-04 03:16:23","updated_at":"2021-10-04 07:30:37","questionName":"How to calculate coupon interest rate","questionTimeSeconds":"0","questionTimeMinutes":"1","questionImagePath":null,"position":3,"explanation":"","question_score_id":null,"lang":"","questionAudioPath":null},{"id":1390447,"quiz_id":"85326","answer_id":null,"answerType_id":"0","created_at":"2021-10-04 03:40:05","updated_at":"2021-10-04 07:30:37","questionName":"Based on a the sinking fund provision which requires firms to either buy back or call a specified percentage of bonds issued every year, if the interest rates fell this year, will the firm choose to buy back or call bonds this year?","questionTimeSeconds":"0","questionTimeMinutes":"1","questionImagePath":null,"position":7,"explanation":"Interest rates have an inverse relationship with bond price. Hence, when interest rates fall, bond price will increase. Thus, by the least-cost method, the firm will choose the cheapest option. As it is now cheaper to call in bonds than to buy on the market (as market price of bonds increased), the firm will thus call in bonds when interest rates increase.","question_score_id":null,"lang":"","questionAudioPath":null},{"id":1390450,"quiz_id":"85326","answer_id":null,"answerType_id":"2","created_at":"2021-10-04 03:48:54","updated_at":"2021-10-04 07:30:37","questionName":"Match the following","questionTimeSeconds":"0","questionTimeMinutes":"1","questionImagePath":null,"position":10,"explanation":"","question_score_id":null,"lang":"","questionAudioPath":null},{"id":1390452,"quiz_id":"85326","answer_id":null,"answerType_id":"0","created_at":"2021-10-04 04:06:51","updated_at":"2021-10-04 07:30:37","questionName":"What is yield to maturity","questionTimeSeconds":"0","questionTimeMinutes":"1","questionImagePath":null,"position":12,"explanation":"","question_score_id":null,"lang":"","questionAudioPath":null},{"id":1390436,"quiz_id":"85326","answer_id":null,"answerType_id":"2","created_at":"2021-10-04 03:05:24","updated_at":"2021-10-04 07:30:37","questionName":"Types of bonds","questionTimeSeconds":"0","questionTimeMinutes":"1","questionImagePath":null,"position":1,"explanation":"","question_score_id":null,"lang":"","questionAudioPath":null},{"id":1390445,"quiz_id":"85326","answer_id":null,"answerType_id":"0","created_at":"2021-10-04 03:25:12","updated_at":"2021-10-04 07:30:37","questionName":"What are sinking funds","questionTimeSeconds":"0","questionTimeMinutes":"1","questionImagePath":null,"position":6,"explanation":"Funds that pools investor money together and reduce risks by diversification are mutual funds. Sinking funds is a bond provision that requires the borrower to pay or buy back a specified amount each year. It is supposed to protect investors by ensuring that the firm is able to pay back the par value by the maturity date. However, if interest rate falls and a bond is called, investor suffers reinvestment losses.","question_score_id":null,"lang":"","questionAudioPath":null},{"id":1390542,"quiz_id":"85326","answer_id":null,"answerType_id":"0","created_at":"2021-10-04 09:02:37","updated_at":"2021-10-04 09:02:37","questionName":"Which of the following shows the formula for YTM?","questionTimeSeconds":"0","questionTimeMinutes":"1","questionImagePath":null,"position":null,"explanation":"Current yield = coupon rate \/ bond price\r\nYTM = rd = r*+IP+MRP+DRP+LP","question_score_id":null,"lang":"","questionAudioPath":null},{"id":1390440,"quiz_id":"85326","answer_id":null,"answerType_id":"2","created_at":"2021-10-04 03:14:07","updated_at":"2021-10-04 07:30:37","questionName":"Match the following","questionTimeSeconds":"0","questionTimeMinutes":"1","questionImagePath":null,"position":2,"explanation":"","question_score_id":null,"lang":"","questionAudioPath":null},{"id":1390444,"quiz_id":"85326","answer_id":null,"answerType_id":"0","created_at":"2021-10-04 03:20:08","updated_at":"2021-10-04 07:30:37","questionName":"Why would issuers want to call bonds early","questionTimeSeconds":"0","questionTimeMinutes":"1","questionImagePath":null,"position":5,"explanation":"When interest rate decreases, calling bonds early would allow firms to lower the cost of borrowing by selling new bonds at a lower coupon rate. This, however, is detrimental for buyers as they will now have to contend with lower coupon rates (new bonds on the market have a lower coupon rate), thus the risk of a bond comprises of both the possibility of an early bond call and its default risk.","question_score_id":null,"lang":"","questionAudioPath":null},{"id":1390531,"quiz_id":"85326","answer_id":null,"answerType_id":"1","created_at":"2021-10-04 08:05:58","updated_at":"2021-10-04 08:05:58","questionName":"How to derive actual invoice","questionTimeSeconds":"0","questionTimeMinutes":"1","questionImagePath":null,"position":null,"explanation":"","question_score_id":null,"lang":"","questionAudioPath":null},{"id":1390451,"quiz_id":"85326","answer_id":null,"answerType_id":"1","created_at":"2021-10-04 03:50:08","updated_at":"2021-10-04 07:30:37","questionName":"How to value bonds","questionTimeSeconds":"0","questionTimeMinutes":"1","questionImagePath":null,"position":11,"explanation":"","question_score_id":null,"lang":"","questionAudioPath":null}]
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What are bonds

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Borrower agrees to make payments of

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