# Finance Ch 5 Bonds

 The flashcards below were created by user Anonymous on FreezingBlue Flashcards. A ___ is a long term contract under which a borrower agrees to make payments of interest and principal on a specific date. Bond ___ bonds are issued by state and local governments and the ___ earned is exempt from federal taxes. MunicipalInterest The face value of a bond is refered to as its ___ value and is usually set at \$___. Par\$1000 The "coupon ___ rate" on a bond is determined by dividing the coupon payment by the par value of the bond. Interest Coupon Rate / Par Value Bond The date on which the par value is paid to the bondholders is call the ____ date. Maturity A ___-___ bond is one whose interest rate fluctuates with shifts of the general level of interest rates. floating rate A ___ coupon bond is one that pays no annual interest but is sold at a discount bbelow par, thus provinding compensation to investors in the form of capital appreciation. Zero A legal document that sets the parameters of a bond issue is called? Indenture In meeting its sinking fund requirements, a firm may ___ a bond or purchase them on the open ___. CallMarket Except when the call for sinking fund purposes, when a bond issue is called, the firm must pay ___, or an amount in excess of ___ value of the bond. PremiumPar A bond with annual coupon payments represents an annuity of INT dollars per year, plus a lump sum of M dollars at the end of N years, and its value, Vb, is its ___ value of this payment stream. Present At the time when a bond is issued, the coupon rate is generalll set at a level that will cause the market ___ and the ___ value of the bond to be almost equal. PricePar Market interest rates move in the ___ direction from one another. Opposite The rate of return earned by purchasing a bond and holding it to maturity is know as its ___ to ___. Yield to Matuity To adjust for semiannual coupon payments the ___ payment and interest rate must be divided by 2 and the number of ___ must be mulitplied by 2. CouponYears A bond secured by real estate is call a ___ bond. Mortgage ___ bonds are issued by the Federal Government aand are not exposed to default risk. Treasury ___ bonds only only interest if interest is earned. Income The interest rate of an ___ bond, or a ___ power bond is based on the inflation index, so that interest payments rise automatically when inflation rises, thus protecting bond holders from inflation. Indexed orPurchasing Any bond originally offered at a proice significantly below its par value is called an original issue ___ bond. Discount Once a bond has been on the market for awhile, it is classified as an oustanding or ___ bond. Seasonsed The ___ yield is the annual coupon rate divided by the bonds current price. CurrentAnnual Coupon Rate/Current Bond Price A ___ fund provision facilitates the orderly retirement of bonds. Sinking The process of using the proceeds of a new lower interest rate bond issue to retire a higher interest rate is called a ___ operation. (this lowers the firm's interest expense) Refunding A ___ provision gives the issuing firm the right to call bonds for redemption under specified terms prior to the normal maturity rate. Call A ___ bond sells above par value when the going interest rate falls below the coupon rate. Premium If current interest rates are well below an outstanding bond's coupon rate, then a callable bond is likely to be called, and investors should expect the rate of return on the bond as the ___ to ___. Yield to Call A ___ is an unsecured bond because it provides no lien against specific property. Debenture A ___ bond call occurs when a bond is not callable until several years after they are issued. These bonds are said to have call ___. DeferedProtection ___ bonds are securities that are exchanged for shares of common stock at a fixed price at the option of the bond holder. Convertable ___ bonds contain provisions that allow the bonds investors to sell the bonds back to the company prior to maturity at a specified date. Putable For bonds with similar coupons, the longer the maturity, the greater exposure to ___ rate risk. Interest ___ risk is also called credit risk. Default A ___ bond sells below par value when interest rates are above the coupon rate. Discount The going rate on a bond consists of a ___ yield plus a ____ ____ yield. CurrentCapital Gains The market value of a bond will always approach its ___ value as its maturity date approaches, provided a firm does not go ___. ParBankrupt A bond's ___ is an indicator of default risk and it has a measurable influence on the bond's interest rate and the firm's cost of debt. Rating Bond are traded in the ___ ___ ___ market. Over the counter AuthorAnonymous ID72388 Card SetFinance Ch 5 Bonds DescriptionFinance Ch 5 Bonds Updated2011-03-12T16:21:50Z Show Answers