7.2 - Bond Features

Question 1

Indenture

Answer 1

a written agreement between the corp and the lenders
a legal document
generally contains:
1. basic terms of the bonds
2. amount of the bonds issued
3. description of property used as security (if bonds are secured)
4. repayment arrangements
5. call provisions
6. details of the protective covenants

Question 2

what is the role of the trustee (trust company) in terms of bonds?

Answer 2

the trust company must:

1. make sure the terms of the indenture are obeyed
2. manage the sinking fund
3. represent bondholders in default

Question 3

what is collateral (in terms of bonds)

what is a collateral trust bond

Answer 3

• securities that are pledged as security for payment of debt

collateral trust bond:
- a bond often secured by a pledge of common stock that is marketable held by the corp