Directions: In well thought-out, complete sentences, please respond to the following questions
Why are fixed income securities referred to as “fixed income?”
The individual or entity that buys a bond is called the _____ whereas the seller of the bond is called the _____.
Why is a bond said to be a loan made to an entity? What is the main benefit of buying a bond from instead of a providing loan to an organization/ entity?
Describe the major three components of a bond: (1) face value, (2) coupon rate, (3) maturity.
What is the difference between a zero coupon and a coupon bond?
How are coupon bond bondholders “rewarded” for purchasing a bond? Meaning, how do they earn interest?
How do zero coupon bond bondholders earn a “reward” for purchasing a bond? Meaning, how do they earn interest?
List and describe the two types of positive cash flows received from a coupon bond.