To be effective issuing and investing in bonds, knowledge of their terminology,

Question

To be effective issuing and investing in bonds, knowledge of their terminology, characteristics, and features is essentia For example is generally $1,000 and represents the amount borrowed from the A bond's bond's first purchaser A bond issuer is said to be in with the terms of the indenture agreement or if it violates one or more of the issue's restrictive covenants if it does nat pay the interest or the principal in accordance .A band contract feature that requires the issuer to retire a specified portion of the bond issue each year is called a A bond's preferred share, respectively, into a specified number or value of common shares. allows a bondholder or preferred stackholder to convert their band or Suppose you read an article about the Golden Gate Bridge and Highway District bonds. It includes the following Bridge Bonds Series A Dated 7-15-2005 4.375% Due 7-15-2055 @.100.00 What is the issuing date of this bond? o 7-15-2055 o 7-15-2005 fthe coupon interest rate is 4.375% for the first six months and changes to a rate equal to the 10-year Treasury bond rate plus 1.3% thereafter, the band is called a bond The contract that describes the terrms of a barrowing arrangement between a firm that sells a band issue and the investors who purchase the bonds is called the Issuers can gradually reduce the outstanding balance of a bond issue by using a sinking fund account into which they deposit a specified amount of money each year. To operationalize the sinking fund provision of an indenture, issuers can (1) purchase aportion of the debt in the open market or (2) call the bonds if they contain a call provision. Under what circumstances would a firm be more likely to buy the required number of bonds in the open market as opposed to using one of the other procedures? O O When interest rates are higher than they were when the bonds were issued When interest rates are lower than they werewhen the bonds were issued

Explanation / Answer

As per rules I will answer the first 4 sub parts of this question

1: Future value/ Par value/ Face value

(This is the future value that would be received by the investor at maturity)

2: default

(Default risk is the risk that the issuer may default in his payments)

3: Sinking fund provision

(This is the provision whereby the issuer repays a part of the bond par value each year)

4. Convertible provision

(This allows the bonds to be converted into shares)

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