ADMS 3595 Lecture Notes - Effective Interest Rate, Unsecured Debt, High-Yield Debt
Document Summary
Long-term debt: obligations not payable within one year, or one business operating cycle - whichever is longer. Examples include: bonds payable, long-term notes, mortgages, pension liabilities, lease liabilities. Often with restrictive covenants (terms) are attached. Yield, effective and market rate are the same. Stated, coupon and nominal rate are the same. Notes payable: : similar in nature to bonds as it requires repayment of principal at a future. Registered and bearer (coupon) bonds: are freely transferable by current owner. Secured and unsecured debt: secured by collateral (real estate, stocks). Collateral trust bonds or notes are secured by shares and bonds of other corporations. Debt instruments that are not backed by collateral are unsecured e. g. , debenture bonds. Junk bonds are unsecured and also very risky and pay a high interest rate. Callable bonds: give issuer right to call and retire debt prior to maturity. The issuer may want to money want if the interest rate is dropping.