Chapter 6

Question 1

What is a bond with a maturity of less than one year called?

Answer 1

Bills or Paper

Question 2

What is a bond with a maturity of 1 to 10 years called?

Answer 2

Note

Question 3

What is a bond with a maturity longer than 10 years?

Answer 3

Bond

Question 4

What is a bond?

Answer 4

Long-term debt instruments that promise fixed payments and have maturities of more than 10 years.

Question 5

What is a bullet/balloon payment?

Answer 5

A principal payment made in one lump sum at maturity.

Question 6

What is a bond indenture?

Answer 6

A legal document that specifies the payment requirements and all other salient matters relating to a particular bond issue, held and administered by a trust company.

Question 7

What is collateral?

Answer 7

Assets that can serve as security for the bond in case of default.

Question 8

What is a fiduciary?

Answer 8

A third party who acts to ensure that the best interests of bondholders are upheld.

Question 9

What is a mortgage bond?

Answer 9

Debt instrument that are secured by real assets.