BU111 Lecture Notes - Lecture 4: Callable Bond, Unsecured Debt, Debenture

• School: WLU
• Department: Business
• Course: BU111
• Professor: Sofy Carayannopoulos

Document Summary

Works with company do discuss stock prices/features/timelines: advise on timing and terms of issue, underwrite (taking responsibility) and take spread and risk or best effort on commission. Trade from company to investor - primary market. Trade from investor to investor - secondary market. Bonds: represents debt for issuing (corporation or government) Fixed rate (coupon rate) often paid semi annually. Fixed term - principle repaid at maturity: priority over stockholders. Features: callable bond, reserved the right to pay off the debt to you before the maturity date, allows the drop of interest rates to be played by companies. Serial: bonds that mature in installments, convertible bond, switch bond into common stock. Interest rates: must be enticing enough to loan the face value, coupon rates are a function of the bond value aspects. Capital gain = face value - purchase price. If interest rates in economy or risk premium change it effects yield: cant change, coupon rate, face value, time to maturity.