金融英语刘文国第二版课后练习exercises10.pdf

Exercises 10 Ⅰ Answer the following questions in English: 1. When is bond said to be selling at a premium and when is bond said to be selling at a discount? When a bond trades at a price above the face value, it is said to be selling at a premium. When a bond sells below face value, it is said to be selling at a discount. 2. What is the most important source of risk for bonds in general? Explain. Interest rates are the most important factor in the pricing of bonds, so interest rate will be most important source of risk. 3. What is the major advantage for municipal bonds? The major advantage to municipal is that the returns are free from federal tax. Furthermore, local governments will sometimes make their debt non-taxable for residents, thus making some municipal bonds completely tax free. 4. What is the coupon? The coupon is the amount the bondholder will receive as interest payments. Its called a coupon because sometimes there are physical coupons on the bond that you tear off and redeem for interest. 5. What are callable bonds? A bond that can be redeemed by the issuer prior to its maturity. Usually a premium is paid to the bond owner when the bond is called. Also known as a redeemable bond. 6. How to classify fixed-income securities in general? In general, fixed-income securities are classified according to the length of time before maturity. These are the three main categories: Bills - debt securities maturing in less than one year. Notes - debt securities maturing in one to 10 years. Bonds - debt securities maturing in more than 10 years. 7. What are zero-coupon bonds? This is a type of bond that makes no coupon payments but instead is issued at a considerable discount t