Fixed-Income Securities Quiz

The entity issuing the bond, responsible for making payments to bondholders.

The date the bond is sold to investors, usually 3 business days after the trade date.

The date on which the bond matures and the principal amount is repaid.

The total amount borrowed by the issuer and to be repaid at maturity.

The fixed or variable interest rate paid periodically by the issuer to the bondholder.

The frequency of interest payments made by the issuer, usually annually or semi-annually.

The ranking of a bond's claim on the issuer's assets in case of bankruptcy or default.

Specific conditions that affect or modify the bond's payment terms, like call provisions or convertible features.

A legal document outlining the terms and conditions of a fixed-income security, including covenants that determine issuer obligations and restrictions.

Legally binding clauses within an indenture that dictate actions required or prohibited for the bond issuer.

The annual interest amount paid to bondholders, calculated by multiplying the bond's coupon rate by its par value.

A type of bond that pays a fixed interest rate over its life.

Bonds with a fixed coupon rate, featuring regular interest payments at pre-determined intervals.

A type of bond with a variable interest rate that resets periodically based on market factors.

A bond that doesn't pay periodic interest but is issued at a discount to its par value, with the difference representing the interest accrued at maturity.

The value of a bond at its maturity date, typically $1000.

The periodic interest payments made by the bond issuer to the bondholder. It's calculated by multiplying the par value of the bond by the coupon rate.

The return on a bond, expressed as a percentage of the bond's price.

The process of calculating the present value of future cash flows from a bond, using a discount rate.

The rate of return that an investor expects to earn on a bond, taking into account its price and expected cash flows.

The difference between the par value of a bond and its market price.

A restriction in a bond indenture that prohibits the issuer from selling assets and immediately leasing them back for a term longer than a specified period.

A clause in a bond indenture that prohibits the issuer from merging with or consolidating with another company, or selling a significant portion of its assets to another company if the resulting company would violate other covenants in the indenture.

Covenants that restrict the issuer's ability to take actions that could dilute the value of the bondholders' claims. Examples include restrictions on sales and leasebacks, mergers, and asset sales.

Covenants designed to protect bondholders in the event of a company's financial deterioration. These covenants are more common for issuers with lower credit quality.

A type of bond that is secured by specific assets of the issuer. In case of default, holders of these bonds have priority claim to the pledged assets.

The annual coupon payment divided by the bond's current price, expressed as a percentage.

A bond's price falling leads to a higher current yield.

A bond indenture is a legal document that lays out the terms of a bond issuance, outlining the rights and obligations of both the issuer and the bondholders.

A downward-sloping yield curve suggests shorter-term bonds have higher yields than longer-term bonds.

Provisions within a bond indenture that specify the actions an issuer must take or refrain from taking, often related to maintaining financial health or avoiding risky activities.

The ability of an issuer to repay its debt obligations, determined by assessing their financial strength and access to resources.

The creditworthiness of a sovereign bond is often considered the highest in a region due to its ability to tax or print money.

A bond covenant prohibiting the issuer from paying dividends, repurchasing shares, or reducing share capital unless specific financial conditions are met.

A covenant that restricts the issuer's ability to take on additional debt, potentially increasing risk for existing bondholders.

A specific type of debt restriction that limits the issuer's ability to issue debt with a higher priority than existing bonds.

A covenant specifying financial ratios that the issuer must maintain to avoid triggering certain restrictions, like dividend payouts.

A covenant specifying financial ratios that the issuer must maintain throughout the term of the bond. It can include ratios such as Net Interest Bearing Debt to EBITDA and Interest Coverage Ratio.

The ability of bondholders to take action if a covenant is violated, such as requiring an increase in the bond's interest rate or accelerating debt payments.

A provision that allows the issuer to buy back outstanding bonds before maturity at a specified price.

A provision that allows bondholders to convert their bonds into shares of the issuer's stock under specific circumstances.