FINC 306 Exam 2 QUESTIONS &
SOLUTIONS(LATEST UPDATE 2026)
bond certificate - ANSWERStates the terms of a bond as well as the amounts and dates
of all payments to be made.
maturity date - ANSWERThe final repayment date of a bond
term - ANSWERThe time remaining until the final repayment date of a bond
face value, par value, principal amount - ANSWERThe notional amount of a bond used
to compute its interest payments. The face value of the bond is generally due at the
bond's maturity.
coupons - ANSWERThe promised interest payments of a bond, paid periodically until
the maturity date of the bond
coupon rate - ANSWERDetermines the amount of each coupon payment of a bond. The
coupon rate, expressed as an APR, is set by the issuer and stated on the bond
certificate
zero coupon bond - ANSWERA bond that makes only one payment at maturity
Treasury Bills - ANSWERZero-coupon bonds, issued by the U.S. government, with a
maturity of up to one year
discount - ANSWERA price at which bonds trade that is less than their face value
pure discount bonds - ANSWERZero-coupon bonds
yield to maturity - ANSWERThe rate of return of an investment in a bond that is held to
its maturity date and makes the promised payments, or the discount rate that sets the
present value of the promised bond payments equal to the current market price of the
bond.
spot interest rates - ANSWERDefault-free, zero-coupon yields
zero-coupon yield curve - ANSWERA plot of the yield of risk-free zero-coupon bonds
(STRIPS) as a function of the bond's maturity date
coupon bonds - ANSWERBonds that pay regular coupon interest payments up to
maturity, when the face value is also paid.
SOLUTIONS(LATEST UPDATE 2026)
bond certificate - ANSWERStates the terms of a bond as well as the amounts and dates
of all payments to be made.
maturity date - ANSWERThe final repayment date of a bond
term - ANSWERThe time remaining until the final repayment date of a bond
face value, par value, principal amount - ANSWERThe notional amount of a bond used
to compute its interest payments. The face value of the bond is generally due at the
bond's maturity.
coupons - ANSWERThe promised interest payments of a bond, paid periodically until
the maturity date of the bond
coupon rate - ANSWERDetermines the amount of each coupon payment of a bond. The
coupon rate, expressed as an APR, is set by the issuer and stated on the bond
certificate
zero coupon bond - ANSWERA bond that makes only one payment at maturity
Treasury Bills - ANSWERZero-coupon bonds, issued by the U.S. government, with a
maturity of up to one year
discount - ANSWERA price at which bonds trade that is less than their face value
pure discount bonds - ANSWERZero-coupon bonds
yield to maturity - ANSWERThe rate of return of an investment in a bond that is held to
its maturity date and makes the promised payments, or the discount rate that sets the
present value of the promised bond payments equal to the current market price of the
bond.
spot interest rates - ANSWERDefault-free, zero-coupon yields
zero-coupon yield curve - ANSWERA plot of the yield of risk-free zero-coupon bonds
(STRIPS) as a function of the bond's maturity date
coupon bonds - ANSWERBonds that pay regular coupon interest payments up to
maturity, when the face value is also paid.
