Reading 42 Flashcards
Describe the five basic features of a fixed-income security?
Issuer of Bond
Maturity date
Par Value
Coupon rate & frequency
Currency
What is the tenor / term maturity
Time remaining to maturity date
Difference between money market & capital market securities?
Mondy market up to one year maturity, all longer maturities are capital market
What is the par value? (Premium & discount)
Principal amount which will be repaid at maturity (also face value, maturity value, redemption value, principal value)
What is the coupon rate?
Annual percentage of par value which will be paid as interest to bondholder
What is a conventional bond
Also called plain vanilla; bond with fixed coupon rate
What is a zcp
Does not pay interest
What is a pure discount bond
Sold at discount and interest paid all at maturity
What is a dual-currency bond
Coupon payments in currency A and coupon payments in currency B
Currency Option
Bondholder can choose in which currency would like to receive payments
Describe the content of a bond indenture
Legal contract defining obligations and restrictions on borrower and basis for all future transactions
How is Bond Indenture called outside North America
Trust deed
Compare affirmative and negative covenants and identify examples of each
Convenants = provisions; negative = prohibitions (restriction asset sales; negative pledge collateral; restriction additional borrowing); positive = affirmative ( make timely interest and principal payments; insure maintain assets; comply with laws and regulation)
Cross default clause
Issuer default on any other debt obligation will default also on this bond
Pari Passu Clause
Bond same priority claims as other senior debt issues
