52 52 typesofbond

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Unformatted text preview: ill change through the years. For example, the conversion price might be $50 for the first five years, $55 for the next five years, and so forth. 47 47 Characteristics of Bond Put provisions Some bonds have a put provision, which gives the bondholder the right to sell the bond back to the issuer at the put price on certain dates before maturity. This mitigates the risk of a decline in the bond price in the event of adverse developments such as rising interest rates or a deterioration in the credit quality of the bond issuer. a put provision will generally be priced higher (premium­sells above its per value) than a comparable bond without a put provision. 48 48 Characteristics of Bond Trustee­ The issuer must appoint a trustee for each bond issue of substantial size. A trustee is the bondholders’ agent, typically a bank, in a public debt offering. The issuer appoints the trustee before selling the bonds to represent the bondholders in all matters concerning the bond issue. This is necessary because...
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This note was uploaded on 02/11/2014 for the course FIN 102 taught by Professor Han during the Fall '11 term at Kazakhstan Institute of Management, Economics and Strategic Research.

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