Test Bank for Fundamentals of Corporate Finance 10th
Edition by Ross Westerfield
Explain the following terms?
coupon - ANSWER:The stated interest payment
made on a bond
face value - ANSWER:The principal amount of a
bond that is repaid at the
end of the term. Also called
par value.
coupon rate - ANSWER:The annual coupon divided
by the face value of a bond.
(coupon rate = coupon/faсe value)
maturity - ANSWER:The specified date on
which the principal amount
of a bond is paid.
yield to maturity
(YTM) - ANSWER:The rate required in the
market on a bond.
Bond value - ANSWER:Present value of the coupons + Present value
of the face amount
current yield - ANSWER:A bond's annual coupon
divided by its price.
indenture - ANSWER:The written agreement
between the corporation
and the lender detailing the
terms of the debt issue.
registered form - ANSWER:The form of bond issue
in which the registrar of
the company records
ownership of each bond;
payment is made directly to
the owner of record
bearer form - ANSWER:The form of bond issue in
, which the bond is issued
without record of the
owner's name; payment is
made to whomever holds
the bond
debenture - ANSWER:An unsecured debt, usually
with a maturity of 10 years
or more.
note - ANSWER:An unsecured debt, usually
with a maturity under 10
years.
sinking fund - ANSWER:An account managed by
the bond trustee for early
bond redemption.
call provision - ANSWER:An agreement giving the
corporation the option
to repurchase a bond at
a specifi ed price prior to
maturity.
call premium - ANSWER:The amount by which the
call price exceeds the par
value of a bond.
deferred call provision - ANSWER:A call provision prohibiting
the company from
redeeming a bond prior
to a certain date.
call-protected bond - ANSWER:A bond that, during a
certain period, cannot be
redeemed by the issuer.
protective covenant - ANSWER:A part of the indenture
limiting certain actions that
might be taken during the
term of the loan, usually to
protect the lender's interest.
zero coupon bond - ANSWER:A bond that makes no
coupon payments and is
thus initially priced at a
deep discount.
Edition by Ross Westerfield
Explain the following terms?
coupon - ANSWER:The stated interest payment
made on a bond
face value - ANSWER:The principal amount of a
bond that is repaid at the
end of the term. Also called
par value.
coupon rate - ANSWER:The annual coupon divided
by the face value of a bond.
(coupon rate = coupon/faсe value)
maturity - ANSWER:The specified date on
which the principal amount
of a bond is paid.
yield to maturity
(YTM) - ANSWER:The rate required in the
market on a bond.
Bond value - ANSWER:Present value of the coupons + Present value
of the face amount
current yield - ANSWER:A bond's annual coupon
divided by its price.
indenture - ANSWER:The written agreement
between the corporation
and the lender detailing the
terms of the debt issue.
registered form - ANSWER:The form of bond issue
in which the registrar of
the company records
ownership of each bond;
payment is made directly to
the owner of record
bearer form - ANSWER:The form of bond issue in
, which the bond is issued
without record of the
owner's name; payment is
made to whomever holds
the bond
debenture - ANSWER:An unsecured debt, usually
with a maturity of 10 years
or more.
note - ANSWER:An unsecured debt, usually
with a maturity under 10
years.
sinking fund - ANSWER:An account managed by
the bond trustee for early
bond redemption.
call provision - ANSWER:An agreement giving the
corporation the option
to repurchase a bond at
a specifi ed price prior to
maturity.
call premium - ANSWER:The amount by which the
call price exceeds the par
value of a bond.
deferred call provision - ANSWER:A call provision prohibiting
the company from
redeeming a bond prior
to a certain date.
call-protected bond - ANSWER:A bond that, during a
certain period, cannot be
redeemed by the issuer.
protective covenant - ANSWER:A part of the indenture
limiting certain actions that
might be taken during the
term of the loan, usually to
protect the lender's interest.
zero coupon bond - ANSWER:A bond that makes no
coupon payments and is
thus initially priced at a
deep discount.
