FinancialMarketsChap21 - Chapter 21 Bond Indentures In a...

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Chapter 21 - Bond Indentures : In a corporate bond agreement, the contract that specifies the obligation of the issuer and the rights of the bondholders. - Bullet Bonds (Bullet Maturity) : A bond where no principal payments are made until the maturity date - Serial Bonds : A bond issue in which the specified principal amounts becomes due at specified dates - Mortgage Bond : A bond in which the issuer has granted the bondholders a lien against pledged assets (a lien is a right to sell mortgaged properties to satisfy unpaid obligations to bondholders) - Collateral Trust Bonds : A bond secured by stocks, notes, bonds, or other kinds of financial instruments - Equipment Trust Certificates : A form of borrowing secured by property such that the title to the property is held in a trust until the debt obligation is paid off - Debenture Bond : A bond not secured by a specific pledge of property, but giving the bondholder the claim of general creditors of all assets of the issuer not pledged specifically to secure other debt - Subordinated Debenture Bonds: A bond in which bondholders rank after secured debt, after debenture, and often after some general creditors in their claim on assets and earnings - Guaranteed Bond: A bond whose obligation is guaranteed by another entity - Refunding Provision : A provision that denies the issuer the right to redeem bonds during some period of time after issuance with proceeds received from issuing lower-cost debt obligations ranking equal to or superior to the debt to be redeemed - Call Risk (Timing Risk): The disadvantages associated with early retirement of a bond issue (because the prince to callable bonds doesn’t rise as much when interest rates decline and because might have to invest at a lower rate) - Sinking Fund Provision: A provision that requires the issuer to retire a specified portion of the issue each year - Convertible Bond: A bond issue in which the bondholder has the right to exchange the bond for a specified number of shares of common stock - Exchangeable Bond: A bond that grants the bondholder the right to exchange the bonds for common stock of a firm other than the issuer of the bond - Warrant: A contract that grants the holder the right to purchase a designated security at a specified price - Putable Bond: A bond that grants the bondholder the right to sell the issue back to the issuer at par-value on designated dates - Floating Rate Securities: A debt obligation in which the coupon interest rate is adjusted periodically on the basis of some predetermined benchmark - Investment Grade Bonds: The term for bonds rated in the highest four quality categories of Moody’s and S&P’s system - High-Yield Bonds (Junk):
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This note was uploaded on 01/27/2010 for the course ECON 252 taught by Professor Robertshiller during the Spring '08 term at Yale.

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FinancialMarketsChap21 - Chapter 21 Bond Indentures In a...

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