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