Chapter 7 Bonds and their Valuation

Chapter 7 Bonds and their Valuation - Bond A long-term debt...

Info iconThis preview shows pages 1–3. Sign up to view the full content.

View Full Document Right Arrow Icon
1 Chapter 7 Bond Valuation P’ O Tuitional BBA Business Finance Bond z A long-term debt instrument. z Treasury bonds : government bonds z Corporate bonds : exposed default risk z Municipal bond : issued by state and local governments. The interest earned is exempt from federal taxes. z Foreign bonds : issued by foreign governments or foreign corporations. Bond z Bond is a long-term promissory note issued by a business or governmental unit. z The issuer receives money in exchange for promising to make interest payments and to repay the principal on a specified future date. z Some recent innovations in long-term financing include zero coupon bonds, which pay no annual interest but which are issued at a discount z Floating rate debt , whose interest payments fluctuate with changes in the general level of interest rate. z Junk bonds, which are high-risk, high-yield instruments issued by firms which use a great deal of financial leverage.
Background image of page 1

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full DocumentRight Arrow Icon
2 Call provision z A call provision gives the issuing corporation the right to redeem the bonds prior to maturity under specified terms, usually at a price greater than the maturity value (the difference is a
Background image of page 2
Image of page 3
This is the end of the preview. Sign up to access the rest of the document.

This note was uploaded on 10/13/2010 for the course BUS 1231 taught by Professor Miko during the Spring '10 term at UC Riverside.

Page1 / 5

Chapter 7 Bonds and their Valuation - Bond A long-term debt...

This preview shows document pages 1 - 3. Sign up to view the full document.

View Full Document Right Arrow Icon
Ask a homework question - tutors are online