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Definition
| An Interest Rate Theory which suggest that the shape of the yield curve is based on what people think (expect) is going to happen to interest rates in the future. For a traditional yield curve, people think that interest rates will rise over time. |
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| Liquidity Preference Theory |
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Definition
| An interest rate theory which suggests that the shape of the yield curve is based on the fact that the longer somebody is going to "lock-in" their money (no liquidity) the more they will expect to receive in interest rates to compensate them for this |
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| Market Segmentation Theory |
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Definition
| An interest rate theory which suggests that the shape of the yield curve is based on the laws of supply and demand |
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| Security (Protective Provision) for a fixed-income security |
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Definition
| the actual assets that are supporting the debt are listed and itemized |
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| Negative Pledge Provision |
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Definition
| -a protective provision that restricts new securities from being issued unless the new issues are secured as well |
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Term
| Limitation on Sale and Leaseback Transactions |
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Definition
| Protective Provision: If a bond is secured by a specific asset, the company cannot sell and then lease the asset back |
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Term
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Definition
| Protective Provision: if a company sells all of it assets, the money must be used to buy back the bonds (retire the debt). If a company merges with another, the new company must take over all of the bonds |
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Term
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Definition
| Protective Provision: Dividends cannot be paid on common shares if the payments would bring the company's equity below a certain threshold |
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Term
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Definition
| Protective Provision: new debt (i.e. new bonds, debentures, etc) cannot be issued if it will take the company's debt-to-equity ratio above some stated limit |
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Term
| Additional Bond Provision |
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Definition
| Protective Provision: this clause states the circumstances (i.e. meeting certain financial tests) under which the company can is allowed to issue more debt |
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Term
| What is the settlement period for a treasury bill? |
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Definition
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Term
| Settlement period for Government of Canada Bonds with 3 years or less to maturity? |
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Definition
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Term
| Settlement period for Government of Canada Bonds with more than 3 years to maturity? |
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Definition
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Term
| Settlement period for Government of Canada Bonds callable within 3 years? |
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Definition
| T+2 (if the bond is called) |
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Term
| Settlement period for all other bonds: |
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Definition
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Term
| What are the three main bond rating services? |
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Definition
1. Dominion Bond Rating Service
2. Moody's Canada Inc.
3. Standard and Poor's Bond Rating Service |
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