Chapter 7 Flashcards
A long-term (10-year or more) promissory note issued by the borrower, promising to pay the owner of the security a predetermined, fixed of interest each year
bond
Any unsecured long-term debt
Debenture
A debenture that is subordinate to other debentures in terms of its payments in case of insolvency
Subordinate debenture
A bond secured by a lien on real property
Mortgage bond
A bond issued in a country different from the one in which the currency of the bond is denominated; for example, a bond issued in Europe or Asia by an American company that pays interest and principal to the lender in U.S. dollars
Eurobond
A debt security that can be converted into a firm’s stock at any prespecified price
Convertible bond
on the face of a bond, the stated amount that the firm is to repay upon the maturity date
Par value
the interest rate contractually owed on a bond as a percent of its par value
coupon interest rate
a bond issued at a substantial discount from its $1,000 face value and that pays little or no interest
zero coupon bond
the length of time until the bond issuer returns the par value to the bondholder and terminates the bond
maturity
an option available to a company issuing a bond whereby the issuer can call (redeem) the bond before its matures. This is usually done if interest rates decline below what the firm is paying on the bond
callable bond (redeemable bond)
prespecified time period during which a company cannot recall a bond
call protection period
the legal agreement between the firm issuing bonds and the bond trustee who represents the bondholders, providing the specific terms of the loan agreement
indenture
any bond rated BB or below. (High-yield bond)
junk bonds
