SIE Unit 3 Flashcards
Balloon Bond
Issuer repays part of bond’s maturities before final maturity date but pays off the major portion at final maturity
Convertible Feature
Investor can convert bond into shares of common stock
Parity
Value of convertible bond equals value of shares an investor would receive if conversion feature were exercised
Duration
Used to measure overall volatility of a portfolio of bonds
Debentures
Debt obligation backed only by word and general creditworthiness
Guaranteed Bonds
Backed by a company other than the issuing corporation
Income Bonds
Issued when a company is coming out of bankruptcy
Order of Liquidation
Secured, unsecured, subordinated debt
Jumbo Certificate of Deposit
CDs with fixed interest rates and face values generally around $1 million
What BAs Are Normally Used For
Finance international trade (pay for goods and services in another country)
Commercial Paper
Max of 270 day maturities and used to finance accounts receivable and seasonal inventory gluts
Repurchase Agreements
Agreement for buyer and seller to conduct a transaction and then reverse that transaction at a later date in the future
Collateralized Mortgage Obligations
Pool a large number of mortgages that are structured into maturity classes called tranches
Collateralized Debt Obligations
Portfolios thatpool non-mortgage loans together
Adjustment Bond
New security issued for the outstanding debt of a corporation facing bankruptcy that needs to recapitalize its debt structure
Promissory Notes
Form of commercial paper issued by corporations
Nominal Yield
Yield stated at time of issuance
When Treasury Bills Pay Interest
At maturity
Government National Mortgage Association (GNMA)
Government-owned corporation that supports Department of Housing and Urban Development; subject to all three levels of tax
How T-Bills Are Delivered
Book Entry
Treasury Receipts
Securities collateralized by principal or interest payments of T-Bills and Notes put into a trust
When Corporate and Municipal Securities Settle
T + 2
When Government Securities Settle
T + 1
Collateral Trust Bonds
Secured bond backed by marketable securities from issuer
Difference of T-Bills From Other Treasury Securities
No stated interest rate
What CMO Is Made Up Of
Different mortgage backed securities (including FNMA and FHLMC)
Business Risk
Related to growth prospects of a business, mostly associated with common stock
Mortgage Bond
Secured bond backed by real estate
