Debt Securities Flashcards
Bonds are classified as what?
Debt securities
Investors on a bond becomes a what?
Creditor, who receives interest payments
Bonds have a par value of what amount?
$1,000
The interest rate of a bond is referred to as
Coupon rate and is a predetermined fixed rate
Series Bonds
Have different issue dates and usually have the same maturity date
Serial Bonds
One issue date and staggered maturity dates
3 categories of bonds
- Corporate
- Government
- Municipal
Current Yield on bonds
Annual interest divided by the market price
What is a nominal yield ?
interest rate on the face of the bond
Which bond reacts quickest to interest rate changes?
short-term
“M” is the roman numeral for
1,000
Corporate bond
and instrument of debt issued by the corporation
Interest is paid how often
Semi-annually, and is fully taxable at the federal, state, and local level.
Corporate bonds are traded where?
over-the-counter (OTC) market
The Trust Indenture Act of 1939
is a federal act that requires all corporate bonds and debentures be issued under an indenture or indeed of trust
The bond indenture
is a document which specifies the rights and duties of the issuer, underwriter, and investor
List the 5 corporate bonds
- Mortgage bonds
- Equipment Trust Certificate
- Collateral Trust Certificate
- Guaranteed Bonds
- Parity Bonds
Closed-end Mortgage bond
A mortgage bond in which the property used cannot be used as collateral for future loans
When would a bond most likely be called ?
The higher the coupon rate (interest rate) on the bond
What notice must be given before a bond can be called?
investors must be given a “Notice of Call”, stating the date the bond will be redeemed
When can a bond be refunded
When there is a sharp decline in interest rates.
What are CMO’s
it is a bond that is secured by a pool of mortgage loans. CMO’s are mortgage-backed securities.
How often do CMO’s pay investors
Monthly
What is a tranch
It is the expected maturity date. Short-term, medium-term, long-term
