Chapter 7 Interest Rates and Bond Valuation (Quiz)

zero coupon bonds

A bond that makes no coupon payments and is thus initially priced at a deep discount.

call protected bond

A bond that, during a certain period, cannot be redeemed by the issuer.

debenture

An unsecured debt, usually with a maturity of 10 years or more.

real rates

Interest rates or rates of return that have been adjusted for inflation.

nominal rates

Interest rates or rates of return that have not been adjusted for inflation.

coupon rate

The annual coupon divided by the face value of a bond.

bid-ask spread

The difference between the bid price and the asked price.

face value

The principal amount of a bond that is repaid at the end of the term. Also called par value.

yield to maturity

The rate required in the market on a bond.

maturity

The specified date on which the principal amount of a bond is paid.

coupon

The stated interest payment made on a bond.

indenture

The written agreement between the corporation and the lender detailing the terms of the debt issue.