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INVESTMENTS EXAM 2

Terms in this set (192)

the _____ market is the portion of the fixed-income market composed of longer-term borrowing or debt instruments than those that trade in the money market
bond
Money Market vs Capital Market
money market- 4 week US treasury bill, 3 month certificate of deposit (CD), commerical paper
capital market - share of stock, a thirty year bond
t-bill
a US government obligation with initial maturity of 1 year or less
CD
a time deposit with a bank
Commercial Paper
short-term unsecured debt issued by large corporations
bankers acceptance
an order to pay a sum of money at a future date, like a postdated check, used widely in foreign trade
repo
an agreement to sell and repurchase an asset
which statements are true about treasury inflation protected securities (TIPS)?
- their yields are interpreted as real interest rates
- the principal amount on them is adjusted in proportion to increases in the consumer price index
- they provide a constant stream of income in real dollars
which statements are true of treasury bills?
-they sell in minimum denominations of only $100
- income earned on them is exempt from state and local taxes
- they are issued with initial maturities of 4,13,26, or 52 weeks
_____ mortgages satisfy certain underwriting guidelines before they may be purchased by Fannie Mae or Freddie Mac, Whereas _____ mortgages are riskier loans made to weaker borrowers.
conforming, subprime
secured bonds
have specific collateral backing them in the event of firm bankruptsy
debentures bond
unsecured bonds which have no collateral
callable bond
firm has the option to repurchase the bond from the holder at a stipulated price
convertible bond
give the bondholder the option to convert each bond into a stipulated number of shares of stock
treasury bonds vs. treasury notes and bonds BOTH
treasury bonds - issued with maturities ranging from 10-30 years
treasury bonds and notes BOTH - commonly traded in denominations of $1000, make semiannual interest payments, sold in increments of $100
a _____ contract calls for delivery of an asset at a specified delivery or maturity date for an agreed upon price
futures
which of the following are mortgage related government agencies, created because congress believed that adequate credit was not being received through normal private sources
Fannie Mae, Freddie Mac, Ginnie Mae, Federal Home Loan Bank
Match the indexes with their country:
FTSE
DAX
TSX
Nikkei
Hang Seng
FTSE - united kingdom
DAX - germany
TSX - canada
Nikkei - Japan
Hang Seng - Hong Kong
the rate at which large banks in london are willing to lend money among themselves is known by the acronym __________
LIBOR - london interbank offered rate
__________ markets include short-term, highly liquid, and relatively low risk debt instruments, whereas __________ markets include longer term, riskier securities
money, capital
which statements are true of money market instruments?
-they have relatively low credit risk
- they can be purchased indirectly through mutual funds
which securities are considered part of the bond market?
- treasury notes
- corporate bonds
in the US, inflation- indexed treasury bonds are referred to by the acronym __________
TIPS
because options provide payoffs that depends on the value of other securities or values, they are considered __________ assets.
derivative
short futures v. long put options v. both
short futures- potential losses are unlimited, convey the obligation to deliver the asset
long put options - require payment of premium, convey the right to sell the asset
both - increase in value when the asset falls in price , specify in transaction price
which statements are true of the S&P 500
- is it based on free float
- it is based on 500 firms
the most marketable of all money market instruments are the US treasury __________
bills
which statements about preferred stock are true?
- it pays a fixed stream of income without a contractual obligation to make the payments
- corporations may exclude 70% of dividends received from domestic corporations from taxable income
which statements are true of the DIJA?
- it has been calculated since 1896
- it must be adjusted for stock splits
bonds issued by the state and local governments are __________ bonds, often referred to by the nickname __________ bonds.
municipal, munis
a mutual fund that holds shares in proportion to their representation in the S&P 500 is an example of an __________ fund
index
when the proportion of the index of a stock represents is proportional to the stock share price, the index is said to be __________ weighted
price
which statements are true about bid- ask spreads
- they are a source of profit for the dealer
- dealers buy at the bid price and sell at the ask price
a certificate- traded in the US markets that represents ownership of shares of a __________ company is referred to as its initial as an ADR.
foreign
which statements about the equivalent taxable yield are correct?
-it is higher than the rate on munis because munis are tax advantaged
- the cutoff tax bracket at which investors are indifferent between it and the muni rate is given by the expression 1 - (rmuni / rtaxable)
true or false: eurobonds are always denominated only in euros
FALSE
the __________ price is the price you would pay for a security from a dealer, and the __________ price is the slightly lower price you would receive if you wanted to sell to a dealer
ask, bid
which statements are true of municipal bonds?
- their interest income is exempt from federal income taxation
- capital gains taxes must be paid if they are sold for more than the investors purchase price
- their interest income is usually exempt from state and local taxation in the issuing state
the right, rather than the obligation, to buy an underlying asset is provided by __________
call options but not futures contracts
the two types of _________ bonds are 1) foreign bonds which are issued in foreign countries but in the currency of the investor and 2) eurobonds which are denominated in a currency other than that of the country in which it was issued
international
a mutual fund that holds shares in proportion to their representation in the S&P 500 is an example of a _________ fund
index
since a bond is a series of cash flows, an increase in the interest rate makes all of the cash flows _________ valuable and _________ the price of the bond
less, reduces
a claim on a specified periodic team of income is a _________ security
fixed income debt
bonds with low credit ratings are referred to as _________
fixed income, debt
speculative grade, junk bonds
the interest rate that makes the present value of a bonds payments equal to its price is defined as the bonds _________
yield to maturity
which statements are true about treasury inflation protected securities (TIPS)?
- they provide a constant stream of income in real dollars
- their yields are interpreted as risk-free real interest rates
- the principal amount on them is adjusted in proportion to increases in the consumer price index
SIV
an off balance sheet virtual bank, frequently operated by a commercial bank or an investment bank, that raises short term funds to finance longer-term investment
CDO
a pool of loans sliced into several tranches with different levels of risks
CDS
a contract that provides insurance against the risk of default
the extendability of a put bond makes the bond more valuable to the _________
bondholder
the name for the derivative contract in which one party sells insurance concerning the credit risk of another firm is _________
credit default swap
a bonds annual coupon payment divided by its prices is defined as its _________ yield
current
the rate of return of a bond over a given period is referred to as it _________ - period return
holding
for premium bonds, the coupon rate is _________ the current yield
greater than
which statements are true of zero-coupon bonds?
- prices of zero-coupon bonds rise exponentially over time
- the IRS treats their price appreciation as imputed taxable interest income to the investor
what is the formula for the present value of a $1 annuity that lasts for t-periods when the interest rate equals r?
1/r(1-(1/(1+r)^T))
bulldogs
pound denominated foreign bonds sold in the UK
samurai bonds
yen-dominated foreign bonds sold in Japan
yankee bonds
dollar denominated bonds originally sold to US investors
euroyen bonds
yen dominated foreign bonds sold outside Japan
eurodollar bonds
dollar denominated foriegn bonds sold outside of the US
eurosterling bonds
pound sterling denominated foriegn bonds sold outside of the UK
the uncertainty surrounding the cumulative future value of bond payments when future rates are uncertain is referred to as _________ risk
reinvestment rate
for what purposes are credit default swaps bought or sold?
- to hedge default risk
- to speculate that a firm is in better financial condition that generally believed
bill
52 weeks or fewer
note
1-10 years
bond
10+ years
when interest rates are positive, a zero-coupon bond will be issued at _________
a discount
a bond that the holder may choose either to exchange for par value at some date or to extend for a given number of years is known as _________ bond
- put
- puttable
- extendable
the curvature of the price - yield relationship of a bond is referred to as its _________
convexity
a bond offered by a foreign borrower to the investors in a national capital market and denominated in that nations currency is a _________ bond issue
foreign
when bonds are subject to potential default, the stated yield to maturity is the _________ yield to maturity that can be realized by the bondholder
maximum possible
the price of the bond is the sum of the _________ values of its coupon payments and par value
present
the yield on the bond and its reinvested coupons over the life of a bond is its _________
realized compound return
an indenture provision specifying requirements of collateral, sinking fund, dividend policy, etc. designed to guard the interests of bondholders is a _________
protective covenant
the two segments of the _________ market are _________
international bond, foreign bond and eurobond
a bond with an option allowing the bondholder to exchange the bond for a specified number of shares of common stock in the firm is a _________ bond
convertible
the ability of an issuer to call a bond makes the bond more valuable to _________
the issuer
which statement about realized compound return are correct?
- the realized compound return of a zero-coupon bond equals its yield to maturity
- a bond realized compound return will equal its YTM if its coupons are reinvested at an interest rate equal to the YTM
- a bonds realized compound return generally can not be calculated in advance
grant manufacturing has issued two bonds recently, one that is callable and one that is callable bond is most likely to have _________
a higher YTM
which statements are true of the figure
- the duration approximation is linear
- when the interest rate decreases, the bonds price changes more than predicted by the duration approximation
of two bonds have the same present value of cash flows but differ in their convexity, the one with greater convexity would be expected to have _______________ the one with lower convexity.
higher price than
a zero-coupon bond has 11 years until maturity. If the yield to maturity. If the yield to maturity is 10%, macaulays duraction of this bond is _______________ years and modified duration is _______________ years
11, 10
as the coupon rate of a bond, increases its sensitivity to interest rate changes _______________
falls
the measure of the average life of a bond, defined as the weighted average of the times until each payment is made, with weights proportional to the present value of the payment, is the definition of
macaulay's duration
only active bond managers v. both active and passive bond managers
only active bond managers- use interest rate forecasts to predict movements in the entire bond market, use intramarket analysts to identify particular sectors of the market or particular bonds that are relatively mispriced
both active and passive bond managers - manage duration of the portfolio, take on risk to increase returns
which statements are true about this figure
-the bond trading at a premium has a 15% coupon and its duration increases with maturity
-the bond trading at par has a 15% coupon, and its duration increases with maturity
- for the zero-coupon bond, duration increases year to year with maturity
bond A is a 10-year zero-coupon bond with yield to maturity of 10%. Bond B is a 15-year semi-annual coupon bond with yield to maturity of 10% and duration of 10 years if the yields of both bonds increase to 10.25%, what can we reasonably predict?
the bonds will have a similar percentage change in price
which statements about the interest rate sensitivity of bonds are correct?
-the sensitivity if bond price to changes in yields increases at a decreasing rate as maturity increases
- an increase in a bonds yield to maturity results in a smaller price change than a decrease in yield of equal magnitude
- as yields increase, bond prices fall
steps in calculating the duration of a bond
1. determine size/timing of all CF of a bond
2. determine PV of each cash flow
3. calculate the weight of each CF
4. multiply the CF weight by the # of periods until it occurs
5. sum the product of the times and weights to generate the weighted average
a bond investment strategy that takes market price of securities as set fairly is referred to as _______________, and one that attempts to achieve returns greater than those commensurate with the risk bourne is referred to as _______________
passive, active
holding interest rates constant, for bonds selling at par or at a premium par, duration _______________ increases with time to maturity
always
when the coupon rate of a bond decreases, its duration _______________
increases
for what reasons is duration a key concept in fixed-income portfolio management?
- it is simple summary statistic of the effective average maturity of the portfolio
- it is used to determine the interest rate sensitivity of a portfolio
- it turns out to be an essential tool in immunizing portfolios from interest rate risk
holding the coupon rate constant, a bonds duration _______________ increases with its time to maturity
usually
when the price-yield curve lies below its tangency line, as may be the case for a callable bond, the curve is said to have _______________ convexity
negative
the duration of a _______________ bond equals its time to maturity
zero-coupon
which is the formula to predict the percentage change in the price of a bond when convexity is taken into account?
...
which is macaulays duration formula?
...
security P is a perpetuity, and security Z is a zero-coupon bond that 15 years remaining until maturity. Both securities have a yield of 5% the duration of security P _______________
is longer than the duration of security Z
in cases when CF are not known, as because of embedded optionality, the sensitivity of a bond to interest rate changes is described by _______________ duration
effective
bond H and Bond L are zero-coupon bonds that have 10-years remaining until maturity, but bond H has a higher yield to maturity than bond L. Bond H duration is _______________ Bond L's duration. When the yields of both bonds increase by 50 Basis points, the percentage drop in bond price will be _______________
the same as, greater for bond L than bond H
in the calculation of macaulay's duration, the weight, Wt, associated with the CF made at time t is which of the following?
W = CFt /(1+y)t/bond price
the difference between the predicted change in a bonds price using duration with and without accounting for convexity will be larger when the interest rate change is _______________ and the bond is _______________ convex
large, more
two puts, one american and one european, are written on the same stock with the same exercise price and time to expiration. If the american put sells for $10, the european put must sell for _______________
less than $10
Jay paul owns a call option on a share of stock with an exercise price of $225. The current stock price is $198, and 5 months remain until expiration. The value of Pauls option is _______________
positive
which characteristics of the underlying stock determine a call options value?
- volatility of the stock price
- dividend rate of the stock
- stock price
the size of the position in the underlying asset that offsets the risk of an option can be calculated using the _______________ ratio
hedge
the price of an option less its intrinsic value is its _______________ value
time
upper bound v. lower bound of call options price
upper bound - the current stock price
lower bound - zero, the current stock price less the present value of the exercise price and dividend
which of the following represents a replicating portfolio for calls in the binomial model?
- borrowing the PV of the lower future stock price and owning the stock
a stock is priced at $100 per share. An investor hoping to price a call option using the two stage binomial model estimates U to be 1.2 and d to be 0.9. compute the three possible stock prices
144, 108, 81
would the item increase or decrease the value of a call
increase: stock price, volatility of stock price, time to expiration, interest rate
decrease: exercise price, dividend rate of stock
a share of stock today is worth $50 today can be either $55 or $45 in one period. A call option has an exercise price of $52. Compute the hedge ratio for the binomial option pricing model
0.30
the greater of 0 or the stock price, also the profit that could be attained by immediate exercise of an option, is the _______________ value of a call option
intrinsic
which statements are true about the three period binomial model illustrated in the figure?
-the outcome U2 can be arrived at via 3 paths
- there are 4 possible stock prices
the _______________ option pricing model is used to calculate the exact prices of option when the underlying asset can take two values in the future
binomial
two calls, one american and one european, are written on the same exercise price and time to expiration. If a stock pays no dividend, the price of the american call may be _______________ the price of the european call
higher than
increase or decrease the value of a put?
increase: interest rate, stock price
decrease: exercise price, dividend rate of stock, volatility of stock price
as a call option goes very deeply out of the money, its value goes to _______________, and it goes very deeply into the money, its value goes to _______________. Define "adjusted" intrinisic value as the current stock price less the present value of the exercise price
zero, the "adjusted" IV
as the option maturity in the binomial model is broken up into more subperiods, the probability distribution for the final stock price begins to resemble a _______________ curve
single - humped
for a part that can be exercised before expiration (i.e. an american put), an increase in the time to expiration will _______________ its price.
increase
the condition under which it may make sense for a call option to be exercised early is if _______________
the underlying stock pays a dividend before expiration expires
the obligation, rather than the right, to buy or sell an underlying asset is specified by _______________
both forward and future contracts
established by exchanges to facilitate transfer of securities resulting from trades, the middleman between two futures traders is the _______________
clearinghouse
at the maturity of a futures contract, the profit to the _______________ position _______________
- long; spot price at maturity - original futures price
- short; original futures price - spot price at maturity
which statement describe being long futures contracts and which describe being long a call options contract
futures - one can not simply walk away from the contract, the price adjusts to make the PV of the position 0, its pay off can be negative
option - if confers the right, not the obligation, to purchase the asset, the contract is purchased, losses are limited to initial repurchase price
the price at which a futures trader commits to make or take delivery of the underlying asset is the _______________
futures price
which statements are true of futures markets?
- buyers/sellers trade in a centralized futures exchange
- the contracts are standardized
- futures contracts call for a daily settling up of any gains/losses
an oil producer who wishes to sell barrells of oil in 3 months would most likely take the _______________ position in the futures market
short
futures contracts on the shares of one company rather than an index are _______________ futures
single - stock
an agreement calling for future delivery of, and payment for, an asset at a previously agreed upon price is a _______________ contract
forward
as the settlement date of a futures contract approaches, its open interest typically _______________
falls
As future prices change, any proceeds acrue to a traders margin account _______________
daily
the established value below which a traders margin cannot fall without triggering a margin call is _______________ margin
maintenance
that the futures price and the spot price at the maturity of a futures contract must be the same is referred to as the _______________ property
convergence
futures markets are regulated by the _______________
CFTC: commodities future trading commission
true or false: trading of futures contract is almost exclusively performed between floor traders in the trading pit on futures exchange
FALSE
the provision of some futures contracts that requires not delivery of the underlying assets but the dollar value of the asset is referred to as _______________
cash settlement
at the intuition of futures contracts, margin must be posted by _______________
traders taking the long position and those taking the short position
the price for the owner of a long position who buys a contract and closes or reverses, it at a later time is the change in the _______________ over the period
futures price
at the initial execution of a futures contract, each trader establishes an account consisting of cash or near-cash securities that is referred to as _______________ account
margin
Dana mills has the long position in a sugar futures contract with a current futures price of $.20 per pound. Suppose the futures price rises to $.21 per pound during the trading day. Marking to market will require _______________
the short position to transfer $0.01 per pound to the futures clearing house
the cost of buying and selling a stock consists of _______________
brokers commission, dealers bid-ask spread, and a price concession an investor may be forced to make
you purchased 100 shares of common stock on margin for $50 per share. the initial margin is 50% and the stock pays no dividend. what would you rate of return be if you sell stock at $56 per share?
100($50)(0.50) = 2500
(50-50)(100) = 600
return = 600/2500 = 0.24
which of the following orders is most useful to short sellers who want to limit their potential losses
stop-buy order
which of the following orders instruct the broker to sell at or above a specified price?
limit-sell order
in a typical underwriting arrangement, the investment-banking firm
1. sell shares to the public via an underwriting syndicate
2. purchases the securities from the issuing company
3. assumes the full risk that the shares may not be sold at the offering price
You purchased JNJ stock at $50 per share. The stock is currently selling at $65. Your gains may be protected by placing a
limit- sell order
firms raise capital by issuing stock in the _______________
primary market
Assume you sell short 100 shares of common stock at $45 per share, with initial margin at 50%. What would be your rate of return if you repurchase the stock at $40/share? The stock paid no dividends during the period, and you did not remove any money from the account before making the offsetting transaction.
profit on stock = ($45 -$40) x 100 = $500 /2250 = 22.22%
Treasury Inflation-Protected Securities (TIPS)
provide a constant stream of income in real (inflation-adjusted) dollars and have their principal adjusted in proportion to the consumer price index
the bid price of a T-bill in the secondary market is
the price at which the dealer in T-bills is willing to buy the bill
which of the following statements are true regarding municipal bonds?
-a municipal bond is a debt obligation issued by state or local gov
- the interest income from a municipal bond is exempt from federal income taxation
- the interest income from a municipal bond is exempt from state and local taxation in the issuing state
in the event of a firms bankruptsy
the most shareholders can lose is their original investment in the firms stock and the claims of preferred stockholders are honored before those of common stockholders
in which of the following indices are market-value weighted
-NY stock exchange composite index
- S&P 500 Stock index
which security should sell at a greater price?
a) a 10 - year treasury bond with 6% coupon rate vs. 10 year tbond with a 7.5% coupon
- a 10 yr t bond with a 7.5% coupon
-a 10 yr treasury bond with a 6% coupon rate
b) a 3 month expiration call option with an exercise price of $90 vs. a 3-month call on the same stock with an exercise price of $85
- a 3-month expiration call with an exercise price of $90
- a 3-month expiration call option with an exercise price of $85
c) a put option on a stock selling at $100, or a put option on another stock selling at $110
- a put option on another stock selling at $110
- a put option on a stock selling at $110
A) a 10-year t bond with a 7.5% coupon
B) a 3 month expiration call option with an exercise price of $85
C) a put option on a stock selling at $100
the ________ is the fraction of earnings reinvented in the firm
retention rate or plowback ratio
you wish to earn a return of 13% on each of two stocks, x and y. Stock x is expected to pay a dividend of $3 in the upcoming year while stock Y is expected to pay a dividend of $4. In the upcoming year , the expected rate of dividends for both stocks is 7%. The intrinsic value of stock X __________________
will be greater than the intrinsic value of Stock Y
you wish to earn a return of 12% on each of two socks, A and B. Each of the stocks is expected to pay a dividend of $2. In the upcoming year. The expected growth rate of dividends is 9% for stock A and 10% for stock B. The intrinsic value for stock A ___________________
will be greater than the intrinsic value fo stock B
low tech company has an expected ROE of 10%. The dividend growth rate will be _________. If the firm follows a policy of paying 40% of earnings in the form of dividends
10% x 0.60 = 6.0%
you are considering acquiring a common stock that you would like to hold for one year. You expect to recieve both $1.25 in dividends and $32 from the sale of the stock at the end of the year. The maximum price you would pay for the stock today is __________ if you wanted to earn a 10% return
.10 = (32-P+125)/P
P = 30.23
sure tool company is expected to pay a dividend of $2 in the upcoming year. The risk free rate of return is 4%, and the expected return on the market portfolio is 14%. Analysts expect the price of sure tool company shares to be $22 a year from now. The beta of sure tool company's stock is 1.25. The markets required rate of return on sure's stock is
4% + 1.25(14%-4%) = 16.5%
___________ must be paid by the buyer of the bond and remitted to the seller of the bond
accrued interest
the invoice price of a bond that a buyer would pay is equal to ___________
the asked price plus accrued interest
the ___________ is a measure of the average rate of return an investor will earn if the investor buys the bond now and holds it until maturity
yield to maturity
Consider two bonds, A and B. Both bonds presently are selling at their par value of $1,000. Each pays interest of $120 annually. Bond A will mature in 5 years, while bond B will mature in 6 years. If the yields to maturity on the two bonds change from 12% to 10%, _________.
both bonds will increase in value, but bond B will increase more than bond A
the ___________ is used to calculate the PV of a bond
yield to maturity
if a 6.75% coupon bond is trading for $1016, it has a current yield of ___________
67.50/1016 = 6.64
you have just purchased a 7-year zero-coupon bond with a ytm of 11% and a par value of $1000. What would your rate of return be at the end of the year if you sell the bond? ytm = 9% at the time of sale.
1000(1.11)7 = 481.66
1000/(1.09)6 = 596.27
481.66 - 596.27 / 481.66 = 23.8%
a treasury bill with a par value of $100,000 due two months from now is selling today for $98,039 with an effective annual yield of
1961/98039 =0.02 (1.02)6 - 1 = 12.62%
a convertible bond has a par value of $1000 and a current market value of $950. The current price of the issuing firm stock is $22 and the conversion ratio is 40 shares. The bonds conversion premium is:
22 x 40 = 880
950-880 = 70
if a 70% coupon bond that pays interest over 182 days paid interest 32 days ago, the accrued interest would be
35 x (32/182) = $6.15
a 7% coupon bond with an ask price of $100 pays every 182 days. if the bond paid interest 32 days ago, the invoice price on the bond would be ___________
1000 x (35 x (32/182)) = 1006.15
under the expectation hypothesis, if the yield curve is upward sloping, the market must expect an increase in short term interest rates
true, under the expectations hypothesis, there are no risk premia built into bond prices. The only reason for long-term yields to exceed short term yields is an expectation of higher short term rates in the future.
if the liquidity preference hypothesis is true, what shape would the term structure curve have in a period where interest rates are expected to be constant?
the liquidity theory holds that investors demand a premium to compensate them for interest rate exposure and the premium increases with maturity. add this premium to the flat curve and the result is an upward sloping yield curve.
the bid price of a T-bill in the secondary market is ___________
the price at which the dealer inn T-bills is willing to buy the bill
the interest rate charged by banks with excess reserves at a federal reserve bank to banks needing overnight loans to meet reserve requirements is called the ___________
federal funds rate
which of the following is true regarding municipal bonds?
1. municipal bond is a debt obligation issued by state or local government
2. municipal bond is a debt obligation issued by federal gov
3. the interest income from a municipal bond is exempt from federal income taxation
4. the interest income from a municipal bond is exempt from state or local income taxation
1, 3, 4
In the event of the firm's bankruptcy
the most shareholders can lose is their original investment in the firm's stock and the claims of preferred shareholders are honored before those of the common shareholders.
if a treasury note has a bid price of $995, the quoted bid price in the wall street journal would be _____________
99:16
a call option allows buyers to __________________
buy the underlying asset at the exercise price before or on the expiration date
a bond that can be retired prior to maturity by the issuer is a _____________ bond
callable
which investment is considered the safest
t-bills
the invoice price of a bond that a buyer would pay is equal to _______________
the asked price plus accrued interest
_______________ are more likely to be called when interest rates decline and have a call price that declines as time passes
callable bonds
the _______________ on a bond is the discount rate that will set the PV of the payments equal to the bond price
YTM
a bond will set at a discount when _______________
the coupon rate is less than the current yield, and the current yield is less than the yield to maturity
_______________ is a graphical depiction of term structure of interest rates and is usually depicted for US treasuries in order to hold risk constant across maturities and yields
the yield curve
prior to expiration, _______________
the actual value of a put option is greater than the intrinsic value
the price of a stock put option is _______________ correlated with the stock price and _______________ correlated with the strike price.
negatively, positively
lower dividend-payout policies have a _______________ impact on the value of the call and a _______________ impact on the value of the put compared to higher dividend-payout policies
positive, negative
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