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Bond Valuation
1/ What is a secured bond?
Bond that is backed by collateral
2/ What is a zero coupon bond?
No coupon payments, but bonds at a deep discount, get lump sum
3/ What is a step-up note?
Pays a higher coupon rate for following periods.
4/ What is a deferred coupon bond?
Bonds that let the issuer avoid using cash to make interest payments for a specified number of years.
Coupon payment is deferred for a certain amount of time
5/ What is a callable bond?
Issuer has option to call bond and pay off with proceeds from a new issue sold at a lower yield. May be
redeemed before maturity by the company.
6/ What is the interest rate risk associated with bonds? (meaning, how do the price of bonds change when
the interest rate increases, and when it decreases)
If interest rate rises, value of investment falls, and vice versa
