2. Characteristics of bonds To be effective issuing and investing in bonds, knowledge of their terminology, characteristics, and features is essential. For example: - A bond's refers to the interest payment or payments paid by a bond. - A bond issuer is said to be in 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. - A bond contrect feature that requires the issuer to retire a specified portion of the bond issue each year is called a - A bond's allows a boll tholder 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 bends. It includes the following information: Bridge Bonds Series A Dated 7-15-2005 4.375\% Due 7-15-2055 9100.00 What is the coupon interest rate of this bond? 0.435% 4.375% If the coupon interest rate is 4.375% for the first six months and changes to a rate equal to the 10 -year Treasury bond rate plus 1.3% thereafter, the bond is called a bond. 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 the tstuers can gradually reduce the outstanding balance of a bond issue by using a sinking fund account into which they deposit a specified amount of money each year, To operationalize the sinking fund prevision of an indenture, issuefs can (1) purchase a portion of the debt in the open market or (2) call the bonds if ther contain a call provision. Under what dircumstances would a firm be more likely to buy the required number of bonds in the open market as opposed to using one of the other procedures? When inferest rates are lower than they were when the bonds were issued When interest retes are higher than they were when the bonds were issued