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

For example:

	A bonds 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 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 .
	A bonds 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?

4.375%

0.435%

If the coupon interest rate remains constant from the time of issue until the bond matures, then 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?

Sinking fund provision

Deferred call provision

Call provision

Convertible provision

When are issuers more likely to call an outstanding bond issue?

When interest rates are higher than they were when the bonds were issued

When interest rates are lower than they were when the bonds were issued