Term
|
Definition
| a contract in which a borrower promises to pay a specified rate of interest to a lender for each period the bond is outstanding and repay the principal at the maturity date. The maturity date of a bond is normally greater than 10 years. |
|
|
Term
|
Definition
| bonds for which no collateral has been pledged to guarentee their repayment. |
|
|
Term
|
Definition
| Bonds for which assets have been pledged in order to guarentee repayment. |
|
|
Term
|
Definition
| Bonds for which the names and addresses of the bondholders are kept on file by the issuing company and pays interesst only to those names on file. |
|
|
Term
|
Definition
| unregistered bonds for which owners receive periodic interest payments by clipping a coupon from the bond and sending it to the issuer as evidence of ownership |
|
|
Term
|
Definition
| bonds that mature in one single sum at a specific future date. |
|
|
Term
|
Definition
| bonds that mature in a series of installments at specified future dates. |
|
|
Term
|
Definition
| bonds for which the issuer reserves the right to pay the obligation before its maturity date |
|
|
Term
|
Definition
| bonds that can be traded for, or converted to, other securities after a specified period of time |
|
|
Term
| Zero Coupon(deep discount) bonds |
|
Definition
| bonds issued with no promise of interest payments; only a single payment will be made |
|
|
Term
|
Definition
| bonds issued by companies in weak financial condition with large amounts of debt already outstandinf; these bonds yield high rates of return because of high risk |
|
|
Term
|
Definition
| a contract between a bond issuer and a bond purchaser that specifies the terms of a bond. The market price of the bond is influenced by the riskiness of the bonds, interest rate at which the bonds are issued |
|
|
Term
|
Definition
| Face value,Maturity; the amount that will be paid on a bond at the maturity rate |
|
|
Term
|
Definition
| the date at which a bond principal or face amount becomes payable. When a company issues bonds, they will make two payments. Payment of interest of a fixed amount at equal intervals over the life of the bond. And a single payment the principal at maturity date. |
|
|
Term
| Market Rate(effective rate;yield rate) |
|
Definition
| the actual interest rate earned or paid on a bond investment |
|
|
Term
|
Definition
| the rate of interest printed on the bond |
|
|
Term
|
Definition
Market>Stated=discount
Market<Stated=premium |
|
|
Term
|
Definition
| the difference between the face value and the sales price when the bonds are sold below their face value. Bonds face value is 800,000 sell for 741,124. |
|
|
Term
|
Definition
| the difference between the face value and the sales price when bonds are sold above their face value |
|
|
Term
| 4 steps to computing bond values |
|
Definition
1. Determine the market interest rate
2. Compute the present value of the maturity amount
3. Compute the present value of the annuity of annual interest payment(using the market interest rate as the discount rate)
4. Add the quantities computed in 2 and 3. |
|
|
Term
| When a company issues bonds it must account for; |
|
Definition
1. Issuance(sale) of the bonds
2. Interest Payments
3. Amortization of any bond premium or discount. |
|
|
Term
|
Definition
| the measure of leverage computed by dividing total liabilities by total assets. It measures the amount of assets supplied by lenders. |
|
|
Term
|
Definition
| the number of dollars borrowed funds for every dollar invested by owners; computed as total liabilities divided by total stockholders equity. |
|
|
Term
|
Definition
| a measure of borrower's ability to make required interest payments; computed as income before interest and taxes divided by annual interest expense. This measures how much cushion a company has in terms of being able to make its periodic interest payments. |
|
|
