Chapter 5 Flashcards
The Trust Indenture Act of 1939
Regulates corporate bond offerings
A normal, positive, ascending, or upward sloping yield curve indicates that:
bonds with longer maturities have higher yields than bonds with shorter maturities
A _____ indenture allows additional bonds to be issued and backed by the same collateral.
open-end
An issuer sells a new bond to pay off the debt of an old bonds.
Refunding
____ bonds are more likely to have a sinking fund than ____ bonds.
Term; serial
An issuer periodically sets aside money for retiring debt into a:
sinking fund
What yield would be disclosed for a bond purchased at a premium and callable at a premium?
The lower of the yield-to-maturity or yield-to-call
Each year’s debt service payments remaining generally equal.
Level Debt Service
The original issue that is being refunded is called:
pre refunded bonds
What does yield-to-maturity take into account that current yield does not?
Discount/premium made or lost at maturity, reinvestment of interest at YTM, and time value of money
Yield-to-call would always be disclosed for a bond that has been:
prefunded
A provision that voids a bond or loan when the borrower sets aside cash or bonds sufficient to pay debt service.
Defeasance
Debt service represents the total of all _____ and _____ payments
principal; interest