chapter 6 part 7 Flashcards
What is a mortgage bond?
A cooperate bond that is secured by land, buildings or equipment. If the issuer defaults on the loan the debt holder acquires the property.
What are first mortgage bonds?
They are the most senior securities of a company as they are the first to be paid if assets are liquidated.
What is the “after-acquired clause” for a first mortgage bond?
It means that anything a company has acquired after the bonds were issued can be used to secure the loan if defaulted.
What is a collateral trust bond?
A bond backed by securities. Usually by a company that does not own very many physical assets.
What is an equipment trust bond?
a variation of a mortgage and collateral trust bond. using equipment to secure a loan rather than a real property
what are subordinated debentures
junior debt of a company. paid last
what is a floating rate security?
A debt security that adjusts to inflation. it can issued for longer periods of time because of this in 6 month intervals. when interest rates go up its positive for this type of debt security
what is a cooperate note?
A short term unsecured promise to repay loan and interest to debt holder. this rank the lowest out of debt securities
what is a domestic bond?
A bond of the currency and country of the issuer.
what is foreign bond?
a bond issued by a company of a different country then the bond. These bonds can have the option of paying interest in a different currency than the bond
what is a eurobond?
A bond where the the issuers location is different than the bond and the currency is different than where the bond is.
international bond market
What is a preffered debenture?
4 points
- can have very long terms 25-99 years
- Senior to company shares but lower than all other debentures
- interest can often be differed for up to 5 years
- they often trade on a exchange
what are high-yield bonds?
consider non investment grade bonds they give higher yields because they have higher chance of defaulting
