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Module 4 Reflection and Self Assessment

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Submitted By trezisely
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Lauren Trezise
Fin-325
July 14th, 2016
Module 4 Reflection and Self-Assessment 1. What was your score on the quiz?
100% on both 2. What questions gave you a hard time? Why?
No issues 3. Identify some of the important features of bonds.

Bonds have set maturity dates that range from 1 to 30 years. They typically offer some form of interest payments either by fixed rate, floating rate, or zero coupon. The bond issuers are required to repay the principle full amount in a lump sum after the bond has reached maturity. The default risk of the bond can be evaluated first-hand to decide if it’s worth investing. It may also be redeemed before the maturity date if it has a “call feature.” Bonds are typically issued in $1,000 or $5,000 denominations.

4. There are three main patterns created by the term structure of interest rates. There are normal, flat, and inverted yield curves. The normal yield curve means that as general current interest rates increase, the price of a bond will decrease and its yield will increase. With a flat yield curve, investors can maximize their risk/return tradeoff by choosing fixed income securities with the least risk or highest credit quality. Lastly, with an inverted yield curve, interest rates decline as time moves farther into the future, which means the yields of long-term bonds will decline. This is a very rare circumstance. This can sometimes be an indicator of a market slowdown. 5. The coupon rate determines if a bond is set at discount value, par, or premium. If it’s discount value, the coupon value is lower than the YTM. If it’s par, that means it’s coupon rate is equal to its YTM. If it’s premium value, the coupon rate is higher than its YTM. 6. When investors buy a stock, they buy a piece of the company also known as a share. Companies raise money by issuing said stock frequently through initial public

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