Investing in Bonds
About the Lecture
The lecture Investing in Bonds by Edu Pristine is from the course Archiv - Fixed Income. It contains the following chapters:
- Risk associated with investing in bonds
- How Maturity, Coupon, Options affect Interest Rate Risk
- Callable Bonds
- Floating Rate Bonds
Author of lecture Investing in Bonds
Edu Pristine
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Excerpts from the accompanying material
... Default risk: that the issuer will be unable to pay the scheduled interest payments due to financial hardship. Repayment of principal risk: that the issuer will be unable to repay the principal ...
... Investing in Bonds. Interest Rate risk: refers to the effect of change in the market interest rates on the price of the bond. The overall interest rates will change from the levels extant when ...
... if the interest rates fall "Prepayment risk: is the risk to prepayment of the principal amount before its due date "Reinvestment risk: is the risk that the cash flows from the securities will be reinvested at ...
... Investing in Bonds. Exchange rate/Curreny risk: Is the uncertainity regarding movement in the exchange rates and the consequent impact on the returns from ...
... options as a result of interest rate volitality. Event risk: refers to the risks such as natural disasters, corporate takeovers. These risks are defined as the risks outside the ...
... Investing in Bonds. Inflation risk: It refers to the risk of errosion of the purchasing power of the returns from the security as a a result of unexpected rise in inflation. ...
... infrastructural bond issued by the Turkish government. Which of the following is most likely a correct classification of risk Corporate Bond Infrastructure bond 1. Karen and Carl are ...
... Corporate bonds face an event risk. Takeovers are a form of an event that can trigger certain provisions ...
... the yield required by the market and the bond's price relative to par value ...
... Bond Trades at Par = Face Value (%) Given in the indenture Determined by the market ...
... Interest Rates Decrease -Price of a Bond Increases Coupon Rate
... year risk-free interest rate is 8% and risk premium on debt is 1.25% I. 10-year, 9% semi-annual coupon bond. II. 10-year, 9% quarterly coupon bond. III. 10-year, 9% monthly coupon bond. ...
... An increase in the yield by 50 basis points will most likely result in the price becoming: A. $1,000 ...
... calculations as the value of a bond ...
... Prerequisite Explain the interest rate risk of a floating-rate security ...
... Hence, Interest Rate Risk of FRB's are LOW ...
... 80 basis points. The issue has a floor at 5.5%. If the 6-month LIBOR on the reset date is 5.8%, the coupon rate is closest to A. 4.5% B. 5.5% ...
... October "Floating rate security: It is one whose coupon rate is reset at each coupon date so that it matched the current market yield. It is typically a reference rate (say LIBOR) + additional margin "FRB's will always sell at par on reset dates "However, it is possible for a floating rate security to quote below or above par if there is a change in ...
... 5.8% - 80 basis points = 5.0%. Since the floater has a floor at 5.5%. The coupon is set to 5.5% on the ...
... Carl and Karen are CFA Level I candidates. Carl says that a zero coupon bond has higher interest rate risk than a coupon bond of the same maturity. While Karen says that a ...
... embedded call option in the bond. Zero-coupon bonds have a higher interest rate risk and their prices can change significantly if the yields ...
