F5M4

Question 1

Bond Indenture

Answer 1

contract between issuer and bond holder

Question 2

Face (Par) Value

Answer 2

total dollar amount of bond and basis on which interest is paid

Question 3

Bonds that are stated at ____ is when stated rate equals the market rate

Answer 3

Face (par) value

Question 4

Stated (Nominal or Coupon) Interest Rate

Answer 4

Interests to be paid to investors in cash

The rate is specified in the bond contract

Question 5

Market (effective) interest Rate

Answer 5

Rate of interest actually earned by the bondholder

rate of comparible contracts

Yeild

Question 6

Discount

Answer 6

market rate is HIGHER than the stated rate

Question 7

Premium

Answer 7

market rate is LOWER than the stated rate

Question 8

Bonds

Answer 8

‘long term’ funding

contractual promise by the issuing corporation to pay a sum of money at a designated maturity plus periodic, fixed interest payments

Question 9

who is the borrower of bonds

Answer 9

the issuer/corporation

Question 10

Debenture

Answer 10

unsecured bond

Question 11

mortgage bond

Answer 11

bond secured by real property

Question 12

collateral bond

Answer 12

bond secured by collateral

SECURED

Question 13

Convertible Bond

Answer 13

convertible to CS

Complex capital structure

Either nondetachable or detachable warrants

Question 14

Nondetachable Warrant

Answer 14

convertible bond itself is converted to CS

You have to turn in the bond

Question 15

Detachable warrant

Answer 15

the bond is not surrendered upon conversion

only the warrants plus cash representing the exercise price of the warrants

Question 16

Warrants can be bought and sold separately

Question 17

Participating bond

Answer 17

stated rate of interest and participate in income if certain earning levels are obtains

Question 18

Term Bond

Answer 18

single fixed maturity rate

entire principal paid at the end of the term

Question 19

serial bond

Answer 19

prenumbered bonds that the issuer may call and redeem a portion of by serial number

Question 20

Income bond

Answer 20

bonds that only pay itnerest if certain income objectives are met

Question 21

Zero coupon bonds

Answer 21

‘deep discount’

sold with no stated rate of interest

interest must be computed

paid at a discount and redeemed at face value without periodic interest payments

Question 22

Commodity-Backed Bonds

Answer 22

‘asset-linked’ bonds redeemable either in cash or a stated volume of a commodity, whichever is greater

Question 23

Bond premium

Answer 23

deferred gain

par is greater than coupon

market rate is less than stated

EX: 102

Question 24

Bond Discount

Answer 24

Deffered Loss

Par is less than stated

market rate is up

Ex: 97

Question 25

Coupon rate

Answer 25

stated rate on the bond

Question 26

Bond interest is what kind of cash flow

Answer 26

operating

Question 27

how much is the principal payoff on bonds

Answer 27

ALWAYS the full face amount at maturity

Question 28

Bond selling price

Answer 28

PV of principal PLUS PV of interest payments

Question 29

What is another word for market rate

Answer 29

YTM

Question 30

How to calculate PV factors for bond

Answer 30

If Semiannual N*2 i/2

Question 31

Unamortized Discount/Premium

Answer 31

Deferred gain or loss has to be recognized over time to not violate the matching principal

Question 32

What rate dictates coupon payment

Answer 32

stated interest rate

Question 33

What rate is the YTM rate

Answer 33

effective interest rate market rate

Question 34

What rate dictates SP/PV factors

Answer 34

Effective interest rate, YTM

Question 35

Carrying value of bond

Answer 35

proceeds on sale carry value is pulled to par over time