chapter 13 Flashcards
corporate bond
written pledge to repay a specified amount of money along with interest
face value definition
the dollar amount that the . bondholder will receive at the bond’s maturity date
maturity date definition
the date on which the corporation is to repay the borrowed money
bond indenture definition
a legal document that details all the conditions relating to a bond issue.
trustee definition
the bondholder’s representative.
why corporations sell bonds
to borrow money to pay for major purchases, difficult to sell, to get money to expand or operate, the interest is a tax deductible business expense
4 types of corporate bonds
debenture bonds
mortgage bonds
subordinated debenture bonds
covertible bonds
debenture bonds
most corporate bonds. backed only by the reputation of the issuing company
mortgage bond
a corporate bond that is secured by various assets of the issuing firm
subordinated debenture bond
unsecured bond that gives bondholders a claim secondary to that of other designated bond holders with respect to interest payments and assets
covertible bond
can be exchanged, at the owner’s option, for a specified number of shares of common stock
provisions of repayment: call feature
corporation can call in or buy back oustanding bonds from current bondholders before the maturity date
