BU111 Study Guide - Final Guide: Paradigm Shift, Baby Boom, Protection Mechanism
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BU111 Full Course Notes
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Bonds -> represents debt for issuing corporation or government. Borrowers of unsecured loans/bonds generally must have high credit ratings. Collateral: any asset that a lender has the right to seize if a borrower does not repay a loan (e. g. house) Registered vs bearer: registered: registered names of bondholders within the company. The firm can mail out coupons to these bondholders. The firm knows who they are sending money to because they are registered with the firm: bearer: bearer (coupon) bonds: this requires bondholders to clip coupons from certificates and send them to the issuer (company) to receive payment. Coupons can be received by anyone, regardless of ownership. (anonymous ) o. Callable: issuer of the bond (firm who is borrowing money from bondholder) can pay the bondholders their money before maturity date. Issuers (company) usually do this when prevailing interest rates are lower than the rate being paid on the bond.
