Chapter 8

Question 1

Subordinated debt

Answer 1

Will only receive interest, last creditors to receive money in case of bankruptcy. Still gets their money before equity providers

Question 2

Senior debt holder

Answer 2

Is paid before all other creditors. (tax authority, mortgage lenders)

Question 3

The 5 criteria of an acceptance procedure

Answer 3

1: The borrower
2: The marketing plan
3: The investment plan
4: The financial substantiation
5: The company’s buffer

Question 4

Trustee

Answer 4

Acts on behalf of bondholders if a company fails to meet its payment obligations (legally required in the event of a mortgage loan)

Question 5

Zero bonds

Answer 5

Bonds with no interest payment during the term. Repayment includes all interest payments at the end of the term

Question 6

Discount bonds

Answer 6

Bonds with a low coupon rate, with at the end of the term also a higher repayment than the issue amount.

Question 7

Junk Bonds

Answer 7

Bonds with a very high coupon rate to attract investors in spite of the high risk

Question 8

Conversion value

Answer 8

The share value of a convertible bond, or the proceeds of the bond when converted into shares

Question 9

Reverse convertible

Answer 9

A variation on the convertible bond. The company determines whether the bond will be converted into shares.