Chapter 5 Flashcards

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1
Q

The Trust Indenture Act of 1939

A

Regulates corporate bond offerings

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2
Q

A normal, positive, ascending, or upward sloping yield curve indicates that:

A

bonds with longer maturities have higher yields than bonds with shorter maturities

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3
Q

A _____ indenture allows additional bonds to be issued and backed by the same collateral.

A

open-end

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4
Q

An issuer sells a new bond to pay off the debt of an old bonds.

A

Refunding

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5
Q

____ bonds are more likely to have a sinking fund than ____ bonds.

A

Term; serial

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6
Q

An issuer periodically sets aside money for retiring debt into a:

A

sinking fund

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7
Q

What yield would be disclosed for a bond purchased at a premium and callable at a premium?

A

The lower of the yield-to-maturity or yield-to-call

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8
Q

Each year’s debt service payments remaining generally equal.

A

Level Debt Service

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9
Q

The original issue that is being refunded is called:

A

pre refunded bonds

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10
Q

What does yield-to-maturity take into account that current yield does not?

A

Discount/premium made or lost at maturity, reinvestment of interest at YTM, and time value of money

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11
Q

Yield-to-call would always be disclosed for a bond that has been:

A

prefunded

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12
Q

A provision that voids a bond or loan when the borrower sets aside cash or bonds sufficient to pay debt service.

A

Defeasance

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13
Q

Debt service represents the total of all _____ and _____ payments

A

principal; interest

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