Chapter Ten Terms

Question 1

Bonds

Answer 1

Publicly traded, long-term debt securities

Question 2

Coupon

Answer 2

Annual interest income that the issuer will pay to the bondholder

Question 3

Par Value

Answer 3

(Principal/Face Value) Amount of capital that the borrower must repay at maturity

Question 4

Coupon Rate

Answer 4

Dollar coupon divided by the bond’s par value; expresses the interest payment that the bond issuer makes as a percentage of the bond’s par value

Question 5

Current Yield

Answer 5

Measures the interest component of a bond’s return relative to the bond’s market price

Question 6

Maturity Date

Answer 6

The date where a bond will mature, and its limited life ends

Question 7

Term Bond

Answer 7

Issue has a single, fairly lengthy maturity date for all of the bonds being issues (Common)

Question 8

Serial Bond

Answer 8

Series of bonds with different maturity dates within a single bond offering

Question 9

Note

Answer 9

Debt security that’s originally issued with a maturity of 2 to 10 years

Question 10

Premium Bond

Answer 10

One that sells for more than its par value

Question 11

Discount Bond

Answer 11

Sells for less than par value

Question 12

Call Premium

Answer 12

Extra compensation given to investors who find their bonds called away

Question 13

Call Price

Answer 13

Sum of the par value plus the call premium