Question
Why does a zero-coupon bond usually have greater price sensitivity than a coupon bond of similar maturity?
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Answer
All cash flow arrives at maturity, so duration is higher.
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Question
If a bond is callable, which side benefits from the embedded option when yields fall?
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Answer
The issuer benefits by refinancing at lower rates.
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Question
Why would a convertible bond typically offer a lower coupon than an otherwise similar straight bond?
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Answer
Investors value the conversion option, so they accept less coupon income.
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Question
How does a deferred-coupon structure affect investor cash flow timing?
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Answer
Early coupon payments are postponed, increasing back-loaded cash flows.
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