Corporate Finance- Chapter 7

Coupon The stated interest payment, in dollars, made on a bond each period is called the bond’s:
Face Value The principal amount of a bond that is repaid at the end of the loan term is called the bond’s:
Maturity The specified date on which the principal amount of a bond is repaid is called the bond’s:
Yield to Maturity The rate of return required by investors in the market for owning a bond is called the:
Coupon Rate The annual coupon of a bond divided by its face value is called the bond’s:
Par Value A bond with a face value of $1,000 that sells for $1000 in the market is called:
Discount Bond A bond with a face value of $1000, that sells for less than $1000 in the market is called a:
Premium Bond A bond with a face value of $1000 that sells for more than $1000 in the market is called a:
Debts that mature in less than one year. The unfunded debt of a firm is generally understood to mean the firm’s:
Indenture The written, legally binding agreement between the corporate borrower and the lender detailing the terms of a bond issue is called the:
Registered Form The form of bond issue in which the registrar of the company records ownership of each bond, with relevant payments made directly to the owner of the record, is called the:
Bearer Form The form of a bond issue in which the bond is issued without record of the owner’s name, with relevant payments made directly to whoever physically holds the bond, is called the:
Debentures The unsecured debts of a firm with maturities greater than 10 years are most literally caleld:
Notes The unsecured debts of a firm with maturities less than 10 years are most literally called:
Subordinated ; Senior In the event of default, ____ debt holders must give preference to ______debt holders in the priority of repayment distributions.
Sinking Fund An account managed by the bond trustee for early bond redemption payments is called
Call Provision An agreement giving the bond issuer the option to repurchase the bond at a specified price prior to maturity is called the:
Call Premium The amount by which the call price exceeds the bond’s par value is the:
Prohibition of a company from redeeming callable bonds prior to a certain date A deferred call provision refers to the:
Protective covenants Parts of the indenture limiting certain actions that might be taken during the term of the loan to protect the interests of the lender are called:
Treasury Bond The long-term bonds issued by the United States government are called:
Municipal Bonds The long-term bonds issued by state and local governments in the United States are called:
A Zero Coupon Bond A bond that makes no coupon payments and is initially priced at a deep discount is called:
Floating-rate A bond that pays a variable amount of coupon interest over time is called a:
Convertible A bond which, at the election of the holder, can be swapped for a number of shares of common stock at any time prior to the bond’s maturity is called:
Transparent A financial market is _______ if it is possible to easily observe its prices and trading volume:
Current Yield The annual coupon payment of a bond divided by its market price is called the:
Bid Price The price a dealer is willing to pay for a security held by an investor is called the:
Ask Price The price a dealer is willing to accept for selling a security to an investor is called the:
Nominal Interest rates or raters of return on investments that have not been adjusted for the effects of inflation are called _____ rates.
Real Rates Interest rates or rates of return on investments that have been adjusted for the effects of inflation are called _____ rates.
Fisher Effect The relationship between nominal rates, real rates, and inflation is known as the:
Term Structure of interest rates The relationship between nominal interest rates on default-free, pure discount and the time to maturity is called the:
Inflation Premium The _____ premium is that portion of a nominal interest rate or bond yield that represents compensation for expected future overall price appreciation.
Default Risk The ______ Premium is that portion of a nominal interest rate or bond yield that represents compensation for the possibility of nonpayment by the bond issuer.

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