Understanding Bond Valuation and Yield to Maturity
Chapter 6 Homework
1. Default Risk Premium
The default risk premium is that portion of a nominal interest rate or bond yield that represents compensation for the possibility of nonpayment by the bond issuer.
2. Bond Pricing at Par
A bond with a 5 percent coupon that pays interest semiannually and is priced at par will have a market price of $1,000 and interest payments in the amount of $25 each.
3. Bond Selling at a Premium
All else constant, a coupon bond that is selling at a premium must have a yield
Read MoreUnderstanding Mutual Funds: Types and How They Work
What Are Mutual Funds?
Mutual funds pool funds from several investors and invest in a diversified portfolio of securities. These professionally managed funds offer a way for individuals to invest in a variety of assets, including stocks, bonds, and money market instruments.
Mutual fund investing offers instant diversification, and the fund’s holdings help mitigate risks. In India, mutual funds are regulated, which makes them transparent and highly popular with new and experienced investors.