CHAPTER 10

BOND PRICES AND YIELDS

1.

a. Catastrophe bond. Typically issued by an insurance company. They are similar to

an insurance policy in that the investor receives coupons and par value, but takes

a loss in part or all of the principal if a major insurance claims is filed against the

issuer. This is provided in exchange for higher than normal coupons.

b. Eurobonds are bonds issued in the currency of one country but sold in other

national markets.

c. Zero-coupon bonds are bonds that pay no coupons, but do pay a par value at

maturity.

d. Samurai bond. Yen-denominated bonds sold in Japan by non-Japanese issuers are

called Samurai bonds.

e. Junk bond. Those rated BBB or above (S&P, Fitch) or Baa and above (Moody's)

are considered investment grade bonds, while lower-rated bonds are...