FINA 3315 EXAM 2 QUESTIONS AND
ANSWERS 100% PASS 2026/2027
Bond - ANS A security that obligates the issuer to make specified payments to the holder
over a period of time.
Callable Bonds - ANS Bonds that may be repurchased by the issuer at a specified call price
during the call period.
Collateral - ANS A specific asset pledged against possible default on a bond.
Convertible Bond - ANS A bond with an option allowing the bondholder to exchange the
bond for a specified number of shares of common stock in the firm.
Coupon Rate - ANS A bond's annual interest rate per dollar of par value.
Credit Default Swap (CDS) - ANS An insurance policy on the default risk of a corporate bond
or loan.
Current Yield - ANS Annual coupon divided by bond price.
Debenture - ANS A bond not backed by specific collateral.
@2026 ALLRIGHTS RESERVED 1
, Default Premium - ANS The increment to promised yield that compensates the investor for
default risk.
Discount Bonds - ANS Bonds selling below par value.
Expectations Hypothesis - ANS The theory that yields to maturity are determined solely by
expectations of future short-term interest rates.
Face Value (Par Value) - ANS The payment to the bondholder at the maturity of the bond.
Floating-Rate Bonds - ANS Bonds with coupon rates periodically reset according to a specified
market rate.
Forward Rate - ANS The inferred short-term rate of interest for a future period that makes
the expected total return of a long-term bond equal to that of rolling over short-term bonds.
Horizon Analysis - ANS Analysis of bond returns over a multiyear horizon, based on forecasts
of the bond's yield to maturity and the reinvestment rate of coupons./Forecast of bond returns
based largely on a prediction of the yield curve at the end of the investment horizon.
Indenture - ANS The document of defining the contract between the bond issuer and the
bondholder.
Investment Grade Bonds - ANS A bond rated BBB and above by Standard & Poor's or Baa and
above by Moody's.
@2026 ALLRIGHTS RESERVED 2
ANSWERS 100% PASS 2026/2027
Bond - ANS A security that obligates the issuer to make specified payments to the holder
over a period of time.
Callable Bonds - ANS Bonds that may be repurchased by the issuer at a specified call price
during the call period.
Collateral - ANS A specific asset pledged against possible default on a bond.
Convertible Bond - ANS A bond with an option allowing the bondholder to exchange the
bond for a specified number of shares of common stock in the firm.
Coupon Rate - ANS A bond's annual interest rate per dollar of par value.
Credit Default Swap (CDS) - ANS An insurance policy on the default risk of a corporate bond
or loan.
Current Yield - ANS Annual coupon divided by bond price.
Debenture - ANS A bond not backed by specific collateral.
@2026 ALLRIGHTS RESERVED 1
, Default Premium - ANS The increment to promised yield that compensates the investor for
default risk.
Discount Bonds - ANS Bonds selling below par value.
Expectations Hypothesis - ANS The theory that yields to maturity are determined solely by
expectations of future short-term interest rates.
Face Value (Par Value) - ANS The payment to the bondholder at the maturity of the bond.
Floating-Rate Bonds - ANS Bonds with coupon rates periodically reset according to a specified
market rate.
Forward Rate - ANS The inferred short-term rate of interest for a future period that makes
the expected total return of a long-term bond equal to that of rolling over short-term bonds.
Horizon Analysis - ANS Analysis of bond returns over a multiyear horizon, based on forecasts
of the bond's yield to maturity and the reinvestment rate of coupons./Forecast of bond returns
based largely on a prediction of the yield curve at the end of the investment horizon.
Indenture - ANS The document of defining the contract between the bond issuer and the
bondholder.
Investment Grade Bonds - ANS A bond rated BBB and above by Standard & Poor's or Baa and
above by Moody's.
@2026 ALLRIGHTS RESERVED 2
