Part 3: Investment Assets
Paper V — Investment-linked Long Term Insurance · Part 3: Investment Assets
Further reading: Investment Assets study notes →
Which of the following are money market instruments? I. Certificate of Deposit II. Ordinary shares III. Convertible bonds
Why: Money market instruments are short-term debt instruments, typically with maturity of less than one year. A Certificate of Deposit (CD) is a short-term deposit instrument issued by banks and is a money market instrument. The other options are capital market instruments (equities, long-term bonds, real estate).
What does the coupon rate of a bond refer to?
Why: The coupon rate is the fixed annual interest rate set at bond issuance, calculated based on the bond's face value. For example, a bond with face value $1,000 and coupon rate 5% pays $50 interest per year. The coupon rate differs from market interest rates; changes in market rates affect the bond's market price. The annualised total return from holding to maturity is the yield to maturity, which is not the same as the coupon rate.
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