Question

To be effective issuing and investing in bonds, knowledge of their terminology, characteristics, and features is essential For example: • A bond's refers to the interest payment or payments paid by a bond. A bond issuer is said to be in if it does not pay the interest or the principal in accordance with the terms of the indenture agreement or if it violates one or more of the issue's restrictive covenants. • The contract that describes the terms of a borrowing arrangement between a firm that sells a bond issue and the investors who purchase the bonds is called • A bond's allows a bondholder or preferred stockholder to convert their bond or preferred share, respectively, into a specified number or value of common shares. Suppose you read an article about the Golden Gate Bridge and Highway District bonds. It includes the following information: Bridge Bonds Series A Dated 7-15-2005 4.375% Due 7-15-2055 @100.00 What is the issuing date of this bond? 07-15-2005 7-15-2055 If the coupon interest rate is 4.375% for the first six months and changes to a rate equal to the 10-year Treasury bond rate plus 1.3% thereafter, the bond is called a bond. The contract that describes the terms of a borrowing arrangement between a firm that sells a bond issue and the investors who purchase the bonds is called the

Answer 1

A bond's coupon refers to the interest payment or payments made by a bond.

A bond issuer is said to be in default if it does not pay...........covenants.

The contract that describes..........is called bond indenture.

The bond's convertible option allows a ..........common shares.

The issue date is 7-15-2005.

If the coupon interest rate............the bond is called a floating-rate bond.

The contract that describes..........is called bond indenture.

The firm is more likely to buy the bonds when interest rates are higher. This is because if interest rates are higher, the bond would be trading at discount to par value. It is cheaper to buy the bonds. If interest rates are higher, the firm is unlikely to call the bonds. The firm is more likely to call the bonds if interest rates are lower because it can refinance its debt at the lower interest rates by calling the bonds.