Chapter 6 part 1 from notes Flashcards Preview

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Flashcards in Chapter 6 part 1 from notes Deck (87)
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1

Definition of bills or papers

short term bonds with a maturity of less than one year

2

Collateral trust bonds

bonds secured by a pledge of other financial assets, such as common shares, bonds or treasury bills

3

mortgage bonds

debt instruments that are secured by real assets

4

collateral trust bonds

bonds secured by a pledge of other financial assets, such as common shares, bonds or treasury bills

5

Notes

bonds with maturities b/w 1 and 7 years

6

bonds

long-term debt instruments that promise fixed payments and have maturities of longer than 7 years

7

who are the main bond issuers

- federal, provincial and municipal gov
- government agencies (eg Canada mortgage and housing corp, hydro Quebec)
- coroporation and on-resident issuers (maple bond market)

8

who are the main purchasers of bonds

institutional investors (insurance companies, pension funds and bond mutal funds)

9

a bond is what

any debt instrument that promises a fixed income stream to the holder until the maturity date

10

where do you find the promises of the bond

in a contract and are a fixed contractual commitment

11

how often do bonds pay interest or the coupon

semin-annually or annually and full principal payment at maturity

12

what is a bullet payment or balloon payment

- when the principal payment is made in one lump sum at maturity

13

what are bonds sometimes refered to as and why

fixed income securities
- because the interest payments and principal repayment are specified, or fixed at the time the bond is issued

14

if the buyer decides to sell the bond before maturity what happens to the price received

the price recived will depend on the level of interest rates at that time

15

How is a bond's structure different from a loan or mortgage

- beause it had blended payments (principal and interest)

16

a bond can be viewed as 2 separate components what are they

1. an annuity (consisting of identical and regular interest payments)
2. a lump sum payment a maturity

17

what is a bond indenture

a legal document that specifies the payment requirements and all other important matters relating to a particular bond issue, held and administered by a trust company

18

what is collateral

assets that can serve as security for the bond in case of default

19

what are covenant provisions

clauses within the indenture that lay out the legal rights of the bondholder and the obligations of the issuer

20

what is par value

also called face value or marturity value
- amount paid at marturity

21

what is term to maturity

time remaining to maturity date

22

what are interest payments or coupons

amounts paid on a bond at regular intervals

23

what is the par value on most bonds

$1,000
although bond prices are typically quoted on par value of 100

24

if the price of a bond is quoted at $99,583, a $1,000 par value bond would be selling at what

$995.83

25

How are interest payments or coupons determined

by multiplying coupon rate (stated on annual basis) by par value of the bond

26

a bond with a coupon rate of 6% and a par value of $1,000 would pay a coupon of

$60 annual or $30 every 6 months

27

what are mortgage bonds

debt instruments that are secured by real assets
- not all bonds are secured by real property

28

what are debentures

debt instruments similar to bonds but are generally unsecured or are secured by a general floating charge over the company's unencumbered assets (those assets that have not been pledged as security for other debt obligations)

29

what are some examples of debentures

gov bonds, because no specific security is pledged as collateral
- called bonds as a matter of convention

30

what are collateral trusts and bonds secured by

a pledge of other financial assets
such as common shares, bonds or treasury bills