🏷️ LIMITED TIME OFFER: GET 20% OFF GRADE+ YEARLY SUBSCRIPTION →
Log in
HomeTextbook Notes300,000CA170,000

AFM274 Chapter Notes - Chapter 24: Call Option, Callable Bond, Sinking Fund

53 views3 pages
lemonbeetle804
13 Aug 2018
School
University of Waterloo
Department
Accounting & Financial Management
Course
AFM274
Professor
Tu Nguyen

For unlimited access to Textbook Notes, a Class+ subscription is required.

Document Summary

Leveraged buyout (lbo): when a group of private investors purchase all the equity of a public corporation. Indenture: a formal contract between the bond issuer and a trust company, which must be included in public offerings of bonds. Original issue discount (oid) bond: when a coupon bond is issued at a discount. Bearer bonds: bonds that, like currency, are owned by whoever physically possesses the bond certificate. Registered bonds: bonds that have ownership accounted for through list s maintains by brokers. Unsecured debt: unsecured debt holders only have a claim to the assets of the firm that are not already pledged in the event of bankruptcy. Secured debt: debt here specific assets are pl edged as collateral and bondholders have a direct claim to in the event of bankruptcy. Notes: unsecured, short term maturity (less than 10 years) debt. Mortgage bonds: secured debt with real property as co llateral. Asset-backed bonds: secured debt with any type of assets as collateral.

Get access

Grade+20% off
$8 USD/m$10 USD/m
Billed $96 USD annually
Grade+
Homework Help
Study Guides
Textbook Solutions
Class Notes
Textbook Notes
Booster Class
40 Verified Answers
Class+
$8 USD/m
Billed $96 USD annually
Class+
Homework Help
Study Guides
Textbook Solutions
Class Notes
Textbook Notes
Booster Class
30 Verified Answers

Related Documents

AFM274 Chapter Notes - Chapter 23: Syndicate Bank, Unsecured Debt, United States Treasury Security
raspberrygnu289
Management and Organizational Studies 2310A/B Chapter Notes - Chapter 15: Offering Circular, Corporate Bond, Debenture
sangriaspider542
Management and Organizational Studies 2310A/B Chapter Notes - Chapter 15: Call Option, Tender Offer, Capital Structure
byzantiumwoodchuck79

Related Questions

The (-Select- A. discount B. premium C. par) value of a bond is its stated face value or maturity value, and its coupon interest rate is the stated annual interest rate on the bond. The maturity date is the date on which the par value must be repaid. A (-Select- A. call B. redemption C. sinking) provision gives the issuer the right to redeem the bonds under specified terms prior to their normal maturity date, although not all bonds have this provision. Some bonds have (-Select- A. redemption fund B. sinking fund C. call fund) provisions which require the issuer to systematically retire a portion of the bond issue each year. Because sinking fund provisions facilitate their orderly retirement, bonds with these provisions are regarded as being (-Select-A. riskier B. safer C. equivalent) so they will have (-Select- A. lower B. equivalent C. higher) coupon rates than similar bonds without these provisions.

Bonds can be (-Select- A. floating B. zero C. fixed) -rate bonds with a constant coupon rate over the life of the bond, or they can be (-Select- A. floating B. zero C. fixed) -rate bonds with a coupon rate that varies over time depending on the level of interest rates. (-Select- A. Annual coupon B. Zero coupon C. Fixed coupon) bonds pay no annual interest but are sold at a (-Select- A. premium above B. price at C. discount below) par, thus compensating investors in the form of capital appreciation. An original issue discount (OID) bond is any bond originally offered at a price (-Select- A. above its B. below its C. equal to) par value.

(-Select- A. Convertible B. Perpetual C. Putable) bonds are exchangeable at the option of the holder for the issuing firm's common stock. Bonds can be issued with warrants giving the holder the option to purchase the firm's stock for a stated price, thereby providing a capital gain if the stock's price rises. (-Select- A. Income B. Convertible C. Putable) bonds contain a provision that allows holders to sell them back to the company prior to maturity at a prearranged price. (-Select- A. Income B. Default C. Preferred) bonds pay interest only if the firm has earnings, while an indexed (purchasing power) bond bases interest payments on an inflation index to protect the holder from inflation.

Mortgage bonds are backed by (-Select- A. current assets B. fixed assets C. marketable securities) . First mortgage bonds are senior in priority to claims of second mortgage bonds. Debentures are long-term bonds that are not secured by a mortgage. Subordinated debentures are bonds having claims on assets only after senior debt has been paid in full in the event of liquidation. (-Select- A. Secured-debenture B. Investment-grade) bonds are rated triple B or higher, and many banks and other institutional investors are legally limited to only holding these bonds. In contrast, junk bonds are high-risk, high-yield bonds.