Chapter 7 part 2 Flashcards
the written agreement between the corporation and the lender detailing the terms of the debt issue
indenture
- the basic terms of the bonds
- the total amount of bonds issued
-a description of property ysed as security - the repayment arrangements
- the call provisions
- details of the protective covenants
what an indenture includes
any asset pledged on a debt
collateral
secured by a mortgage on real property
mortgage securities
pledges all real property owned by borrower
blanket mortgage
an unsecured debt, usually with a maturity of 10 years or more
debenture
an unsecured debt, usually with a maturity under 10 years
note
an account managed by the bond trustee for early bond redemption
sinking fund
an agreement givng the corporation the option to repurchase a bond at a specific price prior to maturity
call provision
(favors the bond issuer)
the amount by which the call price exceeds the par value of a bond
call premium
a call provision prohibiting the company from redeeming a bond prior to a certain date
deferred call provision
(favors the bondholder, realtive to a regular call provision)
a bond that during a certain period, cannot be redeemed by the issuer
call protected bond
a part of the indenture limiting certain actions that might be taken during the term of the loan, usually to protect the lenders interest
protective covenant
2 types of protective covenants
- negative
- positive
disallows certain actions
which protective covenant
negative covenant
requires certain actions
which protective covenant
positive covenant
state and local governments borrow money by selling notes and bonds
municipal bonds / munis / government bonds
a bond that makes no coupon payments and is thus initially priced at a deep discount
zero coupon bond / zeroes
difference between beginning value and ending value in a given time period
implicit interest
largest securities market in the world
the US treasury market
the price a dealer is willing to pay for a security
bid price
the price a dealer is willing to take for a security
asked price
the difference between the bid price and the asked price
bid-ask price
interest rates or rates of return that have been adjusted for inflation
(the percentage in how much you can buy with your dollars)
real rates
