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FAR > F5M4 > Flashcards

F5M4 Flashcards

1
Q

Bond Indenture

A

contract between issuer and bond holder

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2
Q

Face (Par) Value

A

total dollar amount of bond and basis on which interest is paid

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3
Q

Bonds that are stated at ____ is when stated rate equals the market rate

A

Face (par) value

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4
Q

Stated (Nominal or Coupon) Interest Rate

A

Interests to be paid to investors in cash

The rate is specified in the bond contract

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5
Q

Market (effective) interest Rate

A

Rate of interest actually earned by the bondholder

rate of comparible contracts

Yeild

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6
Q

Discount

A

market rate is HIGHER than the stated rate

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7
Q

Premium

A

market rate is LOWER than the stated rate

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8
Q

Bonds

A

‘long term’ funding

contractual promise by the issuing corporation to pay a sum of money at a designated maturity plus periodic, fixed interest payments

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9
Q

who is the borrower of bonds

A

the issuer/corporation

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10
Q

Debenture

A

unsecured bond

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11
Q

mortgage bond

A

bond secured by real property

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12
Q

collateral bond

A

bond secured by collateral

SECURED

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13
Q

Convertible Bond

A

convertible to CS

Complex capital structure

Either nondetachable or detachable warrants

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14
Q

Nondetachable Warrant

A

convertible bond itself is converted to CS

You have to turn in the bond

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15
Q

Detachable warrant

A

the bond is not surrendered upon conversion

only the warrants plus cash representing the exercise price of the warrants

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16
Q

Warrants can be bought and sold separately

A
17
Q

Participating bond

A

stated rate of interest and participate in income if certain earning levels are obtains

18
Q

Term Bond

A

single fixed maturity rate

entire principal paid at the end of the term

19
Q

serial bond

A

prenumbered bonds that the issuer may call and redeem a portion of by serial number

20
Q

Income bond

A

bonds that only pay itnerest if certain income objectives are met

21
Q

Zero coupon bonds

A

‘deep discount’

sold with no stated rate of interest

interest must be computed

paid at a discount and redeemed at face value without periodic interest payments

22
Q

Commodity-Backed Bonds

A

‘asset-linked’ bonds redeemable either in cash or a stated volume of a commodity, whichever is greater

23
Q

Bond premium

A

deferred gain

par is greater than coupon

market rate is less than stated

EX: 102

24
Q

Bond Discount

A

Deffered Loss

Par is less than stated

market rate is up

Ex: 97

25
Q

Coupon rate

A

stated rate on the bond

26
Q

Bond interest is what kind of cash flow

A

operating

27
Q

how much is the principal payoff on bonds

A

ALWAYS the full face amount

at maturity

28
Q

Bond selling price

A

PV of principal

PLUS

PV of interest payments

29
Q

What is another word for market rate

A

YTM

30
Q

How to calculate PV factors for bond

A

If Semiannual

N*2
i/2

31
Q

Unamortized Discount/Premium

A

Deferred gain or loss

has to be recognized over time to not violate the matching principal

32
Q

What rate dictates coupon payment

A

stated interest rate

33
Q

What rate is the YTM rate

A

effective interest rate

market rate

34
Q

What rate dictates SP/PV factors

A

Effective interest rate, YTM

35
Q

Carrying value of bond

A

proceeds on sale

carry value is pulled to par over time

FAR (41 decks)

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