AAEC 2104 Lecture Notes - Lecture 5: Liability Insurance, Preferred Stock, Vehicle Insurance
18 Aug 2016
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Chapter 14: investing in bonds and other alternatives. Intro: bonds carry less risk than stocks, bonds provide steady income, but returns from bonds are not necessarily low. Why consider bonds: bonds reduce risk through diversification, bonds produce steady income, bonds can be a safe investment if held to maturity. Indenture: a legal ducoment that provides specific terms of the loan agreement. It includes: a despcription of the bond, the rights of the bondholders, the rights of the issuing firm, the responsibilities of the bond trustees. Call provision: when you sell your bond for less than what it"s worth, get better interest rates when you allow call provision. Deferred call: periods of time when you have to sell bonds back. Secured corporate debt: mortgage bond, collateral behind it. Unsecured corporate debt: debenture, what you normally find, nothing tied to it. Not callable: cant buy it back. Most interest payments are exempt from state and local taxes.
