Everything Else Equal _________ Bonds Will Require a Higher Promised

question 11

Multiple Choice

Everything else equal _________ bonds will require a higher promised YTM than ________ bonds.

• A) catastrophe; standard
• B) non-callable; callable
• C) mortgage; debenture
• D) AAA rated; BAA rated

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Definitions:

Option

A financial derivative that gives the holder the right, but not the obligation, to buy or sell an asset at a specified price within a specified time.

American Call Option

A financial agreement granting the purchaser the option, yet not the compulsion, to purchase a stock, bond, commodity, or any asset at a predetermined price within a defined time frame.

Expiration Date

The date on which an option, futures contract, or insurance policy loses its validity or expires.