Bonds and Interest Rate Relationships Quiz

Bonds are debt securities representing loans.

Coupon rate is the annual interest rate paid on a bond.

Fractionalization is dividing a bond issue into smaller denominations.

Redemption is repaying a bond's face value at maturity.

Maturity date is when the face value is repaid to the bondholder.

Term to maturity is the time between purchase and maturity.

Bond prices decrease when interest rates increase.

Interest rate risk refers to the risk of rising interest rates after bond purchase.

A bond issued below its face value is termed as a discount bond.

Fixed-rate bonds pay interest based on a fixed percentage of face value.

Callable bonds allow the issuer to repay before maturity.

Credit risk is the risk of issuer defaulting on interest or principal payments.

The credit rating of the issuer influences credit risk.

Senior bondholders have priority in repayment during default.

A convertible bond can be converted into shares of common stock.

Zero-coupon bonds are issued at a discount.

Yield to call is the yield if the bond is called before maturity.

Accretion is the increase in bond value nearing maturity.

Zero-coupon bonds don't pay periodic interest.

Current yield is not a component of yield to maturity formula.

Bond prices and yields move inversely.

Duration measures bond price sensitivity to interest rate changes.

The bond's market price is the primary determinant of yield to maturity.

The issuer's financial health and creditworthiness determine credit rating.