Flash Card
What is a “call protection period”?
The time period before the first possible call date on a callable bond, thereby guaranteeing the bond will not be called before that date
Additional: a callable bond is not callable in just any date rather on specific dates. The period between the initial issue date and the first potential call date is referred to as the “call protection period”
What is meant by the terms “negotiable” and “marketable” as they relate to bonds?
Negotiable: refers to whether the bond is in a good delivery form
Marketable: bond are those that have a ready market, which means that clients are willing to but the bond because it had an attractive price and feature
What type of bond has had its coupons removed, is sold at a discount, and matures at par?
Strip bond or zero-coupon bond.
What is Samurai bond?
When a British company issues a bond in Japan in Japanese yen.
What purpose do “protective provisions” serve?
Feature/ clause that are added to a bond that serve to reduce the risk of default on the part of the issuer and/or to shelter investors from any weakening of their position relative to other securities from the issuer.
How is the difference between the amount paid for a strip bond and its maturity value taxed?
The difference is taxed as interest income.
What is a negative pledge provision?
A clause that prevents the borrower from pledging any asset to another creditor if the pledge results in less security for the current bond holder.
What is another name for a “serial bond”?
An instalment debenture; raising capital gain issued by Municipalities
What protective provision allows an issuer to repay all or a portion of its bond by maturity?
A sinking fund provision
What is maple bond?
Foreign company issued a bond in Canada in Canadian dollars
What is the range of terms to maturity of short-term bonds?
More than 1 year but less than 5 years
What is the difference between “commercial paper” and “banker’s acceptance paper”?
Commercial: promissory note issued by a corporation that is either secure or unsecured
Banker’s Acceptance: a commercial draft that guarantee by the bank
What determines the amount by which the face value of a Real Return Bond is adjusted?
Inflation rate
If a US issuer issues a bond in India denominated in Canadian dollars, how would it be categorized?
Eurobond
The period of time in which an investor must decide whether he or she wants to extend an extendable bond is known as what?
Election period