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10 Cards in this Set

  • Front
  • Back
What is a financial instrument?
a particular type of debt or equity that a company issues to the public to raise money.
Debt is _______ money that must be repaid.
borrowed
What is the principle?
the amount that must be repaid at the end of the term.
- also called the maturity value, par value, and/or face value of debt.
What is the interest rate?
the borrower's cost of debt.
- with bonds, the interest rate is called the coupon rate
What is the maturity date?
the date when the principle must be repaid.
The annual coupon rate = ____________.
the par value of the bonds * the annual coupon rate
- if coupons are paid semi-annually divide the preceding result by 2
In the event of liquidation, _________ have priority over ________ ________.
debtholders, equity investors.
- employees and customers are paid back first, followed by the government, debtholders/creditors, and equityholders
What is included in Federal government debt?
US Treasury bbills, bonds, and notes.
- considered to be default-free instruments
What does state and local government debt include?
revenue-generating municiple bonds and general obligation municiple bonds (both called munis)
What does corporate debt include?
commercial paper, term loans, junk bonds, and investment grade bonds.