Bonds and Fixed Income

What’s inside

• A bond has a fixed coupon rate. If its market price falls while the coupon payment stays unchanged, what generally…
• A bondholder is generally a creditor of the bond issuer rather than an owner of the issuer.
• Which measure is most commonly used to estimate a bond’s sensitivity to changes in interest rates?
• A floating-rate bond’s coupon payment must remain unchanged for the entire life of the bond.
• What is the main risk to an investor when a callable bond is redeemed early by the issuer?
• An investment-grade credit rating guarantees that a bond issuer will never default.
• What is the usual relationship between prevailing market interest rates and the prices of existing fixed-rate bonds?
• A plain-vanilla bond that makes all promised payments normally returns its face value at maturity.