CFIN Chapter 6

CFIN Chapter 6
.bankers acceptance - ANSWER-short term debt, instrument issued by a bank that obligates the bank to
pay a specified amount at some future date



.bond contract features - ANSWER-1. bond indenture 2. call provision 3. sinking fund 4. convertible
feature



.call provision - ANSWER-provision in a bond contract that gives the issuer the right to redeem the bonds
under specified terms prior to the normal maturity date



.capital gains yield - ANSWER-the percentage change in the market price of a bond over some period of
time



.CD - ANSWER-short term debt, certificate of deposit, interest earning time deposit at a bank or other
financial intermediary



.characteristics of debt - ANSWER-1. principal value 2. interest payments 3. maturity date 4. priority to
assets and earnings 4. control of the firm (votings rights)



.commercial paper - ANSWER-short term debt, a discounted instrument that is a type of promissory
note or legal IOU issued by large, financially sound firms



.converstion feature - ANSWER-permits bondholders to exchange their investments for a fixed number
of shares of common stock



.corporate bonds - ANSWER-long term debt, bonds issued by corporations



.coupon rate - ANSWER-long term debt, interest paid on a bond or other debt instrument stated as a
percentage of its face (maturity) value