2. Characteristics of bonds Aa Aa To be effective issuing and investing in bonds, knowledge of their terminology, characteristics, and features is essential For example: . A bond's refers to its face value and the amount of money that the issuing entity borrows and promises to repay on the maturity date. .A bond issuer is said to be in default if it does not pay the interest or the principal in accordance with the terms of the indenture agreement or if it violates one or more of the issue's restrictive covenants . The contract that describes the terms of a borrowing arrangement between a firm that sells a bond issue and the investors who purchase the bonds is called an indenture . A bond's convertibility provision allows a bondholder or preferred stockholder to convert their bond or preferred share, respectively, into a specified number or value of common shares Suppose you read an article about the Golden Gate Bridge and Highway District bonds. It includes the following information: Bridge Bonds Series A Dated 7-15-2005 4.375% Due 7-15.2055 @100.00 What is the issuing date of this bond? 7-15-2055 O 7-15-2005 If the price of the bond is initially discounted and offers no coupon payments, the bond is called a bond Which feature of a bond contract allows the issuer to redeem bonds under specified terms prior to maturity? O Call provision O Sinking fund provision O Deferred call provision O Convertible provision When are issuers more likely to call an outstanding bond issue? when interest rates are lower than they were when the bonds were issued when interest rates are higher than they were when the bonds were issued