4
Concepts
3
Formulas
0
Decisions
2
Quiz Questions
4 concepts covered in this module.
Bullet: principal paid at maturity. Amortizing: principal paid gradually (e.g., mortgages). Partially amortizing: balloon payment.
Coupon = Reference rate + Spread. Resets periodically. Price stays near par at reset dates.
No periodic coupons. Sold at deep discount to par. Return = capital appreciation. Higher duration than coupon bonds.
Conversion ratio = par/conversion price. Conversion value = ratio × stock price. Floor value = max(straight bond, conversion value).
3 essential formulas for this module.
Where: Resets at reference rate intervals
Where: Value if converted to equity
Where: How much extra you pay for conversion option
Visual overview of how concepts connect in this module.
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Amortizing vs Bullet
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