Series65 MOD 13Corp Bonds

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Author:
Series65ForFab
ID:
292123
Filename:
Series65 MOD 13Corp Bonds
Updated:
2015-01-31 11:27:41
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Series65
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Description:
Corporate Bonds
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  1. When Bond trades for more than PAR (premium) yield to call will be:
    Lower than Nominal Yield
  2. Yield to Call moves in same direction as:
    Yield to Maturity
  3. When Bond trades for LESS than PAR (discount) Yield to call will be:
    Higher than nominal Yield (a profit at maturity)
  4. Equipment Trust Certificates
    Bonds backed by Airplanes and Railroad Equipment. Usually issued as a series
  5. Debenture is backed by:
    Full faith & Credit of issuing company
  6. Nominal Yield is also called:
    • Coupon Rate, Rate
    • Interest paid every yr
  7. In reference to Yield, Bonds purchased at PAR:
    Yield to Maturity=Current Yield=Nominal Yield
  8. Describe Normal Yield Scale
    Is one which the Bonds that mature in early years with lower yield to maturity than those that mature in later years
  9. Describe Inverted Yield Curve
    Is one which the bonds that mature in the early years, have a higher yield to maturity than those that mature in later years
  10. Formula for Conversion Ratio
    Conversion price ÷ into $1000 determines the number of shares for each bond
  11. Debt Service =
    Principal + Interest
  12. Describe Negotiable Certificates of Deposit
    Certificates issued by a bank that are negotiable in the secondary market and can be sold if the holder needs the money
  13. Banker's Acceptance
    Short-term notes used to facilitate Foreign trade in the U.S.
  14. Describe Zero-Coupon Bonds
    Pays all interest at maturity (no monthly) Sold at a discount
  15. Zero Coupon bondholders must claim discount..
    as if they had received the interest (income)
  16. Short Term Bonds
    0-5yrs
  17. Mid term Bonds
    5-20 yrs
  18. Long term Bonds
    20+ yrs
  19. Describe Secured Bonds
    Bonds backed by a specific property such as land, buildings or some other collateral. Most common are Mortgage Bonds
  20. First Mortgage Bonds
    Must be paid in FULL if there is a foreclosure on the property that underlies the bond
  21. Junior Mortgage Bond
    Bond 2nd or 3rd mortgage bonds
  22. Closed-End Mortgage Bonds
    Do not allow additional Bond debt. (safer)
  23. Open-End Mortgage Bond
    Allows additional debt to be issured
  24. Prior Lien Bonds
    Liens that supersede all other bonds
  25. Guaranteed Bonds
    Issued by One Corporation but Guaranteed by a second against default
  26. Income=Adjustment Bonds
    Bonds issued by companies going through some reorganization. Income bonds do not make interest payments unless there is sufficient income to the corporation.
  27. Describe a Bond "trades flat"
    they trade without accrued interest. Buyer does not have to pay the seller any interest.
  28. Collateral Bonds are
    Issued when a corporation puts up collateral (other than real estate) to secure bonds.
  29. Describe a Callable Bond
    Bonds that issuer can repurchase at a stated price before maturity. (i.e. Callable at 107%, at a premium)
  30. Describe Bond Indenture
    Delineates the method/dates by which bonds will/can be called
  31. Call Protection protects who?
    Investors of the bond; usually designating minimum amount of years and require them to be called at a premium.
  32. describe REFUNDING a bond
    If interest rates drop low enough and it has call provision, a corporation can REFUND a bond to re-issue at a lower rate.
  33. Difference between Calling a bond and Refunding a bond
    • Calling pays off outstanding debt.
    • Refunding reissues debt at a lower interest rate
  34. Purchasing Convertible Bonds when underlying Stocks are above Parity Price of the Convertible Bond is called:
    Arbitrage; buying an asset at a lower price and SIMULTANEOUSLY selling at a higher price
  35. Which Bond is backed only by the assets of the company?
    Debenture Bond
  36. Yield on Par Bonds
    Nominal=Current Yield=Yield to Maturity
  37. Current Yield Formula
    Divide the yearly amount of interest by the current market price
  38. What makes up the Yield to Maturity?
    • 1.  Amount of yearly interest
    • 2.  Gain or loss over the period of years
    • 3.  The cost of the bond
  39. Corporate Bonds are always quoted in:
    • 1/8ths of a point (point=$10)
    • 96 3/8% = $963.75
  40. Formula
    Conversion Price (Bonds)
    • To determine Conversion ratio, the conversion price is divided into $1,000 to determine number of shares for each bond.
    • the conversion ratio for a bond that is convertible at $20: $1,000 ÷ $20 = 50 shares
  41. Define Parity
    The price at which the underlying stock (or bond) should be selling so that the stock and bond are equal
  42. Formula
    Conversion Price
    Divide the conversion ratio (# of shares bondholder would receive) into $1000 (face value of bond)
  43. Formula
    Determining Parity price
    • # of Shares x (Convertible) Share price = $1000 
    • once you have conversion ratio. now put in new price and figure out new parity price
  44. Corporate bond interest is calculated on
    • 30 day months or 360 day years
    • The buyer pays the seller of the bond for all the the days of accrued interest from and including the previous interest date, up to but not including the settlement date.

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