Corporate bonds A

Question 1

How do Corporate Bonds work?

Answer 1

A way to raise money for the issuer

Like IOUs

Referred to as fixed Income Securities

Question 2

Corporate bonds are rated how?

Answer 2

By credit agencies

Credit agencies register with the SEC

Lower risk = lower yield

Higher risk = higher yield

If a bond is rated below an “investment grade” rating, it is considered a high yield or junk-bond

Question 3

Trust Indenture of 1939

Answer 3

All bonds issued over 5 million with the maturity of more than a year must be sold under an adventure or contract

Indenture - an agreement between the issue were in the bond buyer that details the specifics of the bond issue and names in independent outside trustee

Question 4

💜Par Value💜

Answer 4

💜Face value of Bond💜

💜Usually is $1000💜

Paid at maturity

💜Printed on certificate💜

💜Par value never changes💜

💜BONDS ARE Traded in a secondary market at more or less than par💜

Question 5

💜Coupon Rate💜

Answer 5

💜Annual interest rate of bond💜

💜Printed on certificate💜

Also called nominal Yield💜

💜Coupon rate NEVER changes💜

💜Corporate bond interest usually paid semi annually(referred to as “s”)💜

Question 6

💜Current Yield💜

Answer 6

💜Coupon Payment / Current Market Price of Bond💜

Question 7

💜When interest rates rise💜

Answer 7

💜Bond’ price goes down💜

Question 8

💜when interest rates drop💜

Answer 8

💜Bond’s price goes up💜