Chapter 32: Medium-Term and Long-Term Loan Capital

Question 1

Medium and Long-Term Capital

Answer 1

• Public CM
• Prival CM

Question 2

Public Capital Market

Answer 2

• Open to anyone to buy/sell debt instruments
• Traders are well informed of supply/demand

Types:
* Fixed IR (bonds)
* Variable IR (floating-rate notes)

Question 3

Bonds

Answer 3

• Usually bearer bonds - fixed IR in denominations of 1k
• Term can vary 5 to 15 years
• Bullet loan = repayment in lump sum at end of term

Question 4

Convertible bonds

Answer 4

certificate of debt with a right of exchange for buyer (holder) into shares

IR usually low

Question 5

Subordinated bond

Answer 5

holder (lender) agrees to some conditions:
* loan will only be repaid after other creditors have been paid
* Higher IR

Question 6

Private CM

Answer 6

Debt instruments traded between parties outside of stock exchange directly