Understanding Bond Characteristic

Front

What is the primary purpose of the indenture in a bond agreement?

Back

To list the specific terms of the loan agreement between the issuer and trustee

Front

In the event of insolvency, which of the following holds the highest priority of claim? Preferred stockholders, Common stockholders, Bondholders and other debt holders, The issuing company's board of directors

Back

Bondholders and other debt holders

Front

What does the par value of a bond represent?

Back

The amount to be repaid to the bondholder at maturity

Front

What happens on the maturity date of a bond?

Back

The bondholder receives the par value from the issuer.

Front

Which of the following best describes the coupon interest rate of a bond? Options: The rate at which the bond can be sold in the market, The annual interest as a percentage of the bond's market price, The annual interest as a percentage of the bond's par value, The difference between par value and market value

Back

The annual interest as a percentage of the bond's par value

Front

How is the current yield of a bond calculated?

Back

Annual interest payment ÷ Current market price

Front

What does a call provision allow the bond issuer to do?

Back

Repurchase the bond before maturity

Front

What is the purpose of a conversion feature in a bond?

Back

It lets bondholders convert their bonds into common stock.