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17 Cards in this Set
- Front
- Back
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Types of mortgage bonds
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1.Closed end mortgage bonds
2.Open end mortgage bonds(riskiest) 3.General mortgage bonds |
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MOrtgage bond
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Debt secured by real property owned by the issuing corporation. They are the largest type of secure securities issued by corps-CONSERVATIVE
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Closed end mortgage bond
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-Secured debt
Property used to secure the loan CANNOT be used as collateral to secure other future loans,unless the subsequent loans are LESSER in claim |
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Open end mortgage bonds
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-Secured debt
Property CAN be used to secure subsequent loans and all debts hold EQUAL claims agaisnt the asset. Riskiest. |
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General mortgage bonds
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Pledges all mortgageable properties of a corp as collateral but does not name any specific lots
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Equipment trust certificate
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-Secured debt
-Generally issued by transpo companies -Secured by new equipment -Trustee holds the title of new equipment until all bonds are paid.If defualt, bondholders have first right to titles. -Not callable,issues in serial form, rarely default |
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Collateral trust certificate
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-Secured debt
A company that uses stock.bonds of other corporations that the issuer owns as collateral |
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Guaranteed bonds
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-Secured debt
Guaranteed by a company other than the company that issued them(parent company might guarantee debt of a subsidiary company) |
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Debenture
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-Unsecured debt
-Backed by the good faith and credit of issuing company |
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Subordinate debt
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-Unsecured debt
-Has a lesser claim than debenture |
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Junk bonds
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RISKY INVESTMENT
AKA High yield bonds -Issued by companies w.o a long track record or ones that have questionable credit strength -Rated BB or lower -More volatile -Higher yields -Sometimes used to finance corp takeovers |
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Fallen angel
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RISKY INVESTMENT
-Bonds issued as inv grade(BBB or higher) but have been downgraded to junk |
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Income or adjustment bond
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RISKY INVESTMENT
Issued by companies in financial difficulty trying to avoid bankruptcy -Promise(not guarantee) to pay interest only if: a.sufficient earnings b.BOD says so -Principle is still due at maturity -Trade 'flat':bad sign -Called adjustment bonds when used in a corp reorganization |
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Parity bonds
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Have equal claim or rights as other bonds which were previously issued
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Zero Coupon bonds
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MOST VOLATILE OF ALL FIXED INCOME INV
-Sold at deep discounts -Pay no interest while the bonds are o/s -Purchased for accumulation of capital for a goal in the future,not income now -Quotes have "zr" in quote |
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Accretion
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Increase in value of a zr coupon bod.Represents the amount of imputed interest which has accumulated.
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Phantom income
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Income zr coupon bond holders are taxed on even though they have received no physical income
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