Management and Organizational Studies 2310A/B Lecture Notes - Lecture 12: Callable Bond, Uptodate, Zero-Coupon Bond

• School: Western University
• Department: Management and Organizational Studies
• Course: Management and Organizational Studies 2310A/B
• Professor: Jun Wang

Document Summary

Written agreement/contract between the borrower and creditors detailing the terms of debt issue. secured vs. debenture: type of the debt security: notes, debentures, or bonds, terms of a bond: registered vs. Bearer: security, if applicable: e. g. collateral and mortgages, seniority: senior vs. junior, sinking fund provisions: account managed by the bond, call provisions, protective covenants: negative (shou shalt not) vs. positive trustee for early bond redemption (shou shalt) The coupon rate depends on the risk characteristics of the bond when issued. Which bonds will have the higher coupon, all else equal: secured debt versus a debenture, subordinated debenture versus senior debt, a bond with a sinking fund versus one without, a callable bond versus a non-callable bond. Ratings provided by rating agencies: e. g. s&p, dbrs in canada; Rating agencies generally concern the possibility of default, not. Moody"s and s&p in u. s. the interest rate risk. investment-grade/junk/high-yield bonds. Make no periodic interest payments (coupon rate = 0%)