Exam #2 Textbook Misc. Flashcards
The risk that arises for bond owners from fluctuating interest rates is called…
interest rate risk.
The longer the time to maturity, the _________ the interest rate risk.
greater
The lower the coupon rate, the __________ the interest rate risk.
greater
The par value is what you pay…
at the end.
The coupon payment is what you pay…
periodically over the maturity of the bond.
A bond’s current yield is the…
bond’s annual coupon / price
True or False: Dividends paid to stockholders are tax deductible.
FALSE
Short-term debt can also be called…
unfunded debt.
Debt securities are typically…
notes, debentures or bonds.
What is an indenture?
a written agreement btwn. the borrower and its creditors
What is a sinking fund?
an account managed by the bond trustee for the purpose of repaying bonds
What is a “call provision?”
The company can buy back bond issuances over a certain period.
What does it mean when a bond is “call-protected?”
The corporate that issued the bond cannot do a call provision during a period of time, called a deferred call provision.
