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10 Cards in this Set
- Front
- Back
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Characteristics of all Bonds |
Long-term Debt Instruments Corporations may raise funding by issuing bonds. Bonds require borrowers to make periodic interest payment and repay the principal at the maturity date. |
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Indenture |
Each debt agreement has terms the debtor must meet. Stated in a legal document |
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Trustee |
Representative of the rights of bondholders who enforces the terms of the indenture. |
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Yield |
Return on a bond expressed Current yield Yield to maturity |
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Risk to bondholders |
Default- failure to meet the terms of the indenture Fluctuations in Interest rates Reinvestment Rate risk Loss of purchasing power |
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Importance of Credit Ratings |
Investment Grade - Triple B or Higher Non-investment grade(High-yield bonds) Mergent’s and Standard and Poor’s ratings |
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Variety of Corporate Bonds |
Mortgage Bonds Equipment Trust Certificates Debentures Subordinated Debentures Income Bonds Convertible Bonds Variable Interest Rate Bonds Zero Coupon Bonds |
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Retiring Debt |
Bonds issued in a series (Serial Bonds) Sinking Funds Call Feature Repurchases |
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Federal Government Securities |
Treasury Bills Treasury Notes and Bonds Zero Coupon Bonds |
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Valuation of Bonds |
Value of a bond is equal to the present value of the cash flows that bond will pay Bond pays cash flows in Coupon Payments or Face Value |
