2. Characteristics of bonds

To be effective issuing and investing in bonds, knowledge of their terminology, characteristics, and features is essential.

For example:

	A bonds coupon payment face or maturity value yield to maturity is generally $1,000 and represents the amount borrowed from the bonds first purchaser.
	A bond issuer is said to be in liquidation default bankruptcy 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 issues 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 trustee a debenture
	A bonds call premium convertibility provision call 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 coupon interest rate of this bond?

0.435%

4.375%

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 a bond issue immediately in its entirety at an amount greater than par value prior to maturity?

Deferred call provision

Call provision

Convertible provision

Put provision

Which term is used to describe a call provision in which the issuer is prevented from calling a portion or the entire issue for several years during the early years of the bond issue?

Declining call provision

Deferred call provision

Delayed call provision