Corporate Debt

Question 1

Arbitrage

Answer 1

simultaneous purchase and sale of the same security to profit from a market inefficiency

Question 2

Collateral Trust Bond

Answer 2

secured bond backed by stocks or bonds of another issuer

Question 3

Convertible bond

Answer 3

debenture that can be exchanged for common stock at specified prices or rates

Question 4

Equipment Trust Certificate

Answer 4

debt obligation typically issued by railroads, airlines, and trucking companies

Question 5

Guaranteed bond

Answer 5

party other than the issuing corporation promises to maintain payments of principal and interest

Question 6

Income bond

Answer 6

interest payment must be declared by issuer’s board of directors

Question 7

Mortgage bond

Answer 7

debt obligation secured as a property pledge

Question 8

98 3/8

Answer 8

$983.75

Question 9

Non-dilutive protection

Answer 9

maximum number of additional shares a corporation may issue while convertible bonds are outstanding

Question 10

parity

Answer 10

dollar amount at which a convertible security is equal in value to its corresponding stock