Textbook Notes (362,768)
Canada (158,052)
Finance (37)
MGFB10H3 (19)
Derek Chau (11)
Chapter 6

Chapter 6 Notes

3 Pages
Unlock Document

University of Toronto Scarborough
Derek Chau

Chapter 6 Bond Valuation and Interest Rates Notes bills or paper short-term bonds with a maturity of less than one year notes bonds with maturities between one and seven years bonds long-term debt instruments that promise fixed payments and have maturities of longer than seven years 6.1 The Basic Structure of Bonds the key feature of a bond is that the issuer agrees to pay the bondholder (investor) a regular series of cash payments and to repay the full principal amount by the maturity date, which are stipulated in the bond contract and are a fixed contractual commitment bullet payment or balloon payment a principal payment made in one lump sum at maturity Basic Bond Terminology bond indenture a legal document that specifies the payment requirements and all other salient matters relating to a particular bond issue, held and administered by a trust company collateral assets that can serve as security for the bond in case of default par value, face value, maturity value the amount paid at maturity for traditional bonds terms to maturity time remaining to maturity date interest payments (or coupons) amounts paid on a bond at regular intervals Security and Protective Provisions mortgage bonds debt instruments that are secured by real assets debentures debt instruments that are similar to bonds but re generally unsecured or are secured by a general floating charge over the companys unencumbered assets (i.e., those assets that have not bee pledged as security for other debt obligations) government bonds are debentures because no specific security is pledged as collateral collateral trust bonds bonds secured by a pledge of other financial assets, such as common shares, bonds, or treasury bills equipment trust certificates a type of debt instrument secured by equipment, such as railway rolling stock protective covenants clauses in a trust indenture that restrict the actions of the issuer; covenants can be positive or negative Additional Bond Features callable bonds give the issuer the option
More Less

Related notes for MGFB10H3

Log In


Don't have an account?

Join OneClass

Access over 10 million pages of study
documents for 1.3 million courses.

Sign up

Join to view


By registering, I agree to the Terms and Privacy Policies
Already have an account?
Just a few more details

So we can recommend you notes for your school.

Reset Password

Please enter below the email address you registered with and we will send you a link to reset your password.

Add your courses

Get notes from the top students in your class.