F5M4 Flashcards
Bond Indenture
contract between issuer and bond holder
Face (Par) Value
total dollar amount of bond and basis on which interest is paid
Bonds that are stated at ____ is when stated rate equals the market rate
Face (par) value
Stated (Nominal or Coupon) Interest Rate
Interests to be paid to investors in cash
The rate is specified in the bond contract
Market (effective) interest Rate
Rate of interest actually earned by the bondholder
rate of comparible contracts
Yeild
Discount
market rate is HIGHER than the stated rate
Premium
market rate is LOWER than the stated rate
Bonds
‘long term’ funding
contractual promise by the issuing corporation to pay a sum of money at a designated maturity plus periodic, fixed interest payments
who is the borrower of bonds
the issuer/corporation
Debenture
unsecured bond
mortgage bond
bond secured by real property
collateral bond
bond secured by collateral
SECURED
Convertible Bond
convertible to CS
Complex capital structure
Either nondetachable or detachable warrants
Nondetachable Warrant
convertible bond itself is converted to CS
You have to turn in the bond
Detachable warrant
the bond is not surrendered upon conversion
only the warrants plus cash representing the exercise price of the warrants
Warrants can be bought and sold separately
Participating bond
stated rate of interest and participate in income if certain earning levels are obtains
Term Bond
single fixed maturity rate
entire principal paid at the end of the term
serial bond
prenumbered bonds that the issuer may call and redeem a portion of by serial number
Income bond
bonds that only pay itnerest if certain income objectives are met
Zero coupon bonds
‘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
Commodity-Backed Bonds
‘asset-linked’ bonds redeemable either in cash or a stated volume of a commodity, whichever is greater
Bond premium
deferred gain
par is greater than coupon
market rate is less than stated
EX: 102
Bond Discount
Deffered Loss
Par is less than stated
market rate is up
Ex: 97
Coupon rate
stated rate on the bond
Bond interest is what kind of cash flow
operating
how much is the principal payoff on bonds
ALWAYS the full face amount
at maturity
Bond selling price
PV of principal
PLUS
PV of interest payments
What is another word for market rate
YTM
How to calculate PV factors for bond
If Semiannual
N*2
i/2
Unamortized Discount/Premium
Deferred gain or loss
has to be recognized over time to not violate the matching principal
What rate dictates coupon payment
stated interest rate
What rate is the YTM rate
effective interest rate
market rate
What rate dictates SP/PV factors
Effective interest rate, YTM
Carrying value of bond
proceeds on sale
carry value is pulled to par over time
