| Question |
Answer |
| Call Feature | A bond provision allowing the issuer of the bonds to buy the bonds back before maturity at a specified price. |
| Convertibility Clause | A bond provision that allows investors to convert the bond into a specified number of common stock shares. |
| Forward Rate | The one-year interest rate that is anticipated one year ahead; commonly used as the markets forecast of the future interest rate. |
| Investment-Grade Bonds | Bonds that are rated as Baa or better by Moody's and BBB or better by Standard and Poor's (S&P). |
| Liquid Security | A security that can be easily converted to cash without a significant loss in value. |
| Liquidity Premium Theory | A theory stating the shape of a yield curve depends on investors' and borrowers' preferences for liquidity. |
| Preferred Habitat Theory | A theory stating that the shape of the yield curve is determined primarily by the segmented markets theory; however, investors and borrowers may wander from their preferred markets if certain events occur.
|
| Pure Expectations Theory | A theory stating that the shape of the yield curve is determined solely by expectations of future interest rates. |
| Segmented Markets Theory | A theory stating that the shape of the yield curve is a result of investors' and borrowers' actions, who choose securities with maturities that satisfy their foretasted cash needs. |
| Term Structure of Interest Rates | The relationship between maturity and annualized yield. |
| Yield Curve | A Graph showing the relationship between maturity and annualized yield. |
Buen Viaje lv.2 ch 8
