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

Understanding Bond Characteristic

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1.
FLASHCARD QUESTION
Front
Back
To list the specific terms of the loan agreement between the issuer and trustee
2.
FLASHCARD QUESTION
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
3.
FLASHCARD QUESTION
Front
What does the par value of a bond represent?
Back
The amount to be repaid to the bondholder at maturity
4.
FLASHCARD QUESTION
Front
What happens on the maturity date of a bond?
Back
The bondholder receives the par value from the issuer.
5.
FLASHCARD QUESTION
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
6.
FLASHCARD QUESTION
Front
How is the current yield of a bond calculated?
Back
Annual interest payment ÷ Current market price
7.
FLASHCARD QUESTION
Front
What does a call provision allow the bond issuer to do?
Back
Repurchase the bond before maturity
8.
FLASHCARD QUESTION
Front
What is the purpose of a conversion feature in a bond?
Back
It lets bondholders convert their bonds into common stock.
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