Fin 380 Notes Lecture 7 BONDS blackboard - Bonds-long-term...

This preview shows page 1 - 2 out of 4 pages.

Bonds-long-term debt securities issued by corporations andgovernmental agenciesSecured bonds have collateralUnsecured bonds are called debentures and sometimessubordinated debenturesBonds are typically registered- which means that theyhave a record of ownershipBearer bonds have no record of ownershipConditions of a bond are listed in the indenture:1. Rights of all parties2. Restrictive provisions3. Sinking fund4. Call feature5. Convertible feature6. Terms: coupon rate, par value, maturity Convertible bond:-purchase a bond for $970 that has a $1000 par value.You can convert the bond into 25 shares of commonstock which is currently selling for $30 a share.Conversion price = __ Par = $40Conversion ratio Conversion ratio = Par = 25Conversion priceConversion value = stock price X conversion ratio$30X25 = $750Conversion Premium = Bond price - conversion value$970-$750 = $220 Types of bonds:

  • Left Quote Icon

    Student Picture

  • Left Quote Icon

    Student Picture

  • Left Quote Icon

    Student Picture