JAIIB · IEIFS

Fixed Income Markets-DEBT and BOND market

Chapter notes, video classes, MCQ practice tests and quick-revision one-liners for Indian Economy and Indian Financial System — JAIIB.

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What is the primary regulator of the government securities (G-Sec) market in India?

The Reserve Bank of India (RBI) is the primary regulator of the government securities market in India, managing issuance and trading of G-Secs on behalf of the central government.

What is a 'Put option' in a puttable bond and how does it benefit the bondholders?

It lets holders sell bond back to issuer at par before maturity.

What does the term 'coupon rate' mean in the context of a bond?

The coupon rate is the fixed annual interest rate paid by the bond issuer to the bondholder, expressed as a percentage of the bond's face value.

What is a 'Gilt-edged security' in the Indian fixed income market?

Government securities considered safest with negligible default risk.

What is a 'zero-coupon bond' and how does it generate returns for investors?

A zero-coupon bond pays no periodic interest but is issued at a deep discount to its face value; the investor's return comes from the difference between the purchase price and the face value received at maturity.

What is 'Price risk' in fixed income securities?

Risk of bond price falling due to rise in market interest rates.

What is the difference between the primary market and the secondary market for debt instruments?

The primary market involves the fresh issuance of debt securities directly by issuers to investors, while the secondary market facilitates trading of already-issued securities between investors.

What is 'Reinvestment risk' in the context of bonds?

Risk that coupon payments are reinvested at lower prevailing interest rates.

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