finance - Chpt. 13 bonds

bonds

lending money to a company or government. In return, they promise to pay you back later, plus interest.

deffered call

bond cant be called until set number of years has passed

sinking bond

bond issuer paying off bond

municipal bonds

small org that needs bonds

how much to zero coupon bonds pay in interest?

0!!

poorer rating means investors demand __ rate of return

higher

safest bond grade

AA

very risky bond rating

CC, C, D

muciple bonds are tax exempt!

yay!

par value

plain value of finance instrument

as issuer becomes riskier, the rate of return should

RISE!

interest rates rise, bonds outstanding value

falls

long term bonds fluctuate in price more than short term bonds

true that

bond approaches maturity, market value approaches

par value

interest rates go down, bond prices go up

call provisions can limit a bonds upward price movement

bonds reduce risk through diversification

true

bonds produce steady income

yes!

bonds are a safe investment if held to

maturity

if interest rates are to go up, purchase _ term bonds

short

the bond you should purrchase if interest rates are to drop and are not callable

long term