Top Things to Know About Bonds Before You Invest

What are bonds essentially described as?

• Real estate certificates

• Formal IOUs

• Cryptocurrency

• Equity instruments

Who can issue bonds?

• Public and private corporations, and government bodies

• Only private corporations

• Only individual investors

• Only federal governments

What is NOT a risk associated with bonds?

• Interest rate risk

• Inflation risk

• Equity risk

• Liquidity risk

What happens to bond prices when interest rates rise?

• They double

• They remain unchanged

• They rise

• They fall

What is the yield to maturity (YTM)?

• The annual interest payment divided by the bond's price

• A measure of the bond's volatility

• The bond's coupon rate

• The total return expected on a bond if held until maturity

Which type of bond is considered the safest?

• Federal government bonds

• Corporate bonds

• Municipal bonds

• Junk bonds

What are 'junk bonds'?

• Government-issued bonds

• Bonds that cannot be traded

• Bonds issued by junk food companies

• Bonds with high risk and potentially high returns

What do bond ratings indicate?

• The bond's market price

• The number of bonds available

• The issuer's credit quality

• The bond's yield to maturity

What is a credit default swap?

• A fixed interest rate bond

• A bond that can be converted into stock

• A method of swapping bonds between investors

• A type of insurance against default risk

What is the purpose of a yield curve?

• To indicate the default risk of a bond

• To display the bond's coupon rates over time

• To graph the relationship between interest rates and bond maturities

• To show the relationship between bond prices and yields