Debt Basics

Question 1

Balloon Maturity

Answer 1

Large number of an issuer’s bonds come due at a specific time, typically the final maturity date

Question 2

Call Protection

Answer 2

Contractual promise stating that the bond issue is not callable for a certain period of time

Question 3

Current Yield

Answer 3

Annual interest divided by today’s market price

Question 4

Debt Service

Answer 4

Schedule for repaying interest and principal

Question 5

Investment grade

Answer 5

Bond rate BBB/Baa or above

Question 6

Premium

Answer 6

Difference between the higher price paid for a bond and the bond’s face amount at issue

Question 7

Prior lien bond

Answer 7

Secured bond with precedence over other bonds secured by the same asset

Question 8

Registered Bond

Answer 8

Bond owner’s name is stored in records kept by the issuer or a transfer agent

Question 9

Sinking fund

Answer 9

account established so that an issuer has the money to redeem its bonds

Question 10

Yield to call

Answer 10

percentage return factoring the difference between a bond’s acquisition costs and proceeds, including annual interest, calculated to the earliest date when the issuer may call the bond