Interest Rates and bond valuation - Corparte Bonds

10 important questions on Interest Rates and bond valuation - Corparte Bonds

What is a corporate bond?

a long-term debt instrument indicating that a corporation has borrowed a certain amount of money and promises to repay it in the future under clearly defined terms.

What is the coupon interest rate?

the percentage of a bond's par value that will be paid annually, typically in two equal semiannual payments, as interest.

What is bond indenture?

A legal document that specifies both the rights of the bondholders and the duties of the issuing corporation.
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What are standard debt provisions

Provisions in a bond indenture specifying certain record keeping and general business practices that the bond issuer must follow; normally, they do not place a burden  on a financially sound business

What are restrictive covenants?

provisions in a bond indenture that place operating and financial constraints on the borrower

Another common restrictive provision is a sinking-fund requirement, what is it?

A restrictive provision often included in a bond indenture, providing for the systematic retirement of bonds prior to their maturity.

What is a trustee?

A paid individual, corporation, or commercial bank trust department that acts as the third party to a bond indenture and can take specified actions on behalf of the bondholders if the terms of the indenture are violated.

What is a call feature?

A feature included in nearly all corporate bond issues that gives the issuer the opportunity to repurchase bonds at a stated call price prior to maturity.

What is the call premium?

the amount by which a bond's call price exceeds its par value.

What is the stock purchase warrants?

instruments that give their holders the right to purchase a certain number of shares of the issuer's common stock at a specified price over a certain period of time.

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