Chapter 14 Bonds

15.What is a bearer?

A bearer (or coupon) bond is may be transferred from one owner to another by mere delivery. (No name on the bond certificate. If you lose it, it belongs to whoever finds it.)

4.What is a Bond Indenture?

A bond contract is known as a bond indenture.

11.What are commodity backed bonds?

Commodity-backed bonds (asset-linked bonds) are redeemable in measures of a commodity, such as barrels of oil or ounces of rare metal.

10.What are convertible bonds?

Convertible bonds are convertible into other securities of the corporation for a specified time after issuance. Holder of the bond has the option to convert it to stocks or other securities.

12.What are deep discount bonds?

Deep-discount bonds, or zero-interest debenture bonds, are sold at a discount that provides the buyer's total interest payoff at maturity.

13.What is an example of a deep discount bond?

Example: Lend $3.5M, no interest pymt, pay back $5M. Frequently sold by government. Matures at one time - end of bond, all interest paid then.

6.What are Unsecured Bonds?

Unsecured Bonds are not backed by collateral. Debenture bonds, junk bonds. These bonds are risky and pay a higher interest rate. Often used to finance leveraged buyouts.

2.What are Bonds?

Bonds are paper certificates, usually with a $1,000 face value, with interest payments usually made semiannually. They are used when capital needs are too large for one lender.

14.What are registered bonds?

Bonds issued in the name of the owner are registered bonds. They require surrender of the certificate and issuance of a new certificate to complete a sale. Most bonds now electronically registered - electronic process to transfer ownership.

3.What is Bonds Payable?

Bonds payable represent a promise to pay: * a sum of money at a designated maturity date, plus * periodic interest at a specified rate on the maturity amount (face value).

8.What are serial Bonds?

Bonds that mature in installments are called serial bonds. Serial bonds are frequently used by school districts, municipalities, and other local taxing districts that receive money through special levies.

7.What are term bonds?

Bonds that mature on a single date are term bonds.

9.What are callable bonds?

Callable bonds give the issuer the right to redeem prior to maturity (buy the bond back).

16.What is a income bond?

Income bonds pay no interest unless the issuing company is profitable.

1.What is Long Term Debt?

Long-term debt consists of a probable future sacrifice of economic benefit arising from present obligations that are not payable within one year or the operating cycle, whichever is longer. Long-term debt has various covenants and restrictions.

17.What is a revenue bond

Revenue bonds pay their interest from specified revenue sources. They are frequently issued by airports, school districts, counties, toll-road authorities, and governmental bodies. Toll road bond - your return will be based on a portion of the income collected at the toll booth.

5.What is a Secured Bonds?

Secured Bonds are backed by a pledge of some sort of collateral. Mortgage bonds are secured by real estate. What are Collateral Trust Bonds? Collateral trust bonds are secured by stocks and bonds of other corporations.