Stephen A. Ross,
Massachusetts Institute of Technology
Randolph W. Westerfield,
University of Southern California
Bradford D. Jordan,
University of Kentucky
Gordon S. Roberts,
York University
| Bearer Form | Bond issued without record of the owner's name; payment is made to whoever holds the bond.
(See Refer to page 204)
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| Bond Refunding | The process of replacing all or part of an issue of outstanding bonds.
(See Refer to page 227)
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| Call Premium | Amount by which the call price exceeds the par value of the bond.
(See Refer to page 205)
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| Call Protected | Bond during period in which it cannot be redeemed by the issuer.
(See Refer to page 205)
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| Call Provision | Agreement giving the corporation the option to repurchase the bond at a specified price before maturity.
(See Refer to page 205)
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| Canada Plus Call | Call provision which compensates bond investors for interest differential making call unattractive for issuer.
(See Refer to page 205)
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| Canada Yield Curve | A plot of the yields on Government of Canada bonds relative to maturity.
(See Refer to page 218)
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| Coupon Rate | The annual coupon divided by the face value of a bond.
(See Refer to page 194)
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| Coupons | The stated interest payments made on a bond.
(See Refer to page 194)
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| Debenture | Unsecured debt, usually with a maturity of 10 years or more.
(See Refer to page 204)
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| Default Risk Premium | The portion of a nominal interest rate or bond yield that represents compensation for the possibility of default.
(See Refer to page 219)
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| Deferred Call | Call provision prohibiting the company from redeeming the bond before a certain date.
(See Refer to page 205)
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| Face Value | The principal amount of a bond that is repaid at the end of the term. Also par value.
(See Refer to page 194)
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| Fisher Effect | Relationship between nominal returns, real returns, and inflation.
(See Refer to page 215)
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| Indenture | Written agreement between the corporation and the lender detailing the terms of the debt issue.
(See Refer to page 203)
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| Inflation Premium | The portion of a nominal interest rate that represents compensation for expected future inflation.
(See Refer to page 217)
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| Interest Rate Risk Premium | The compensation investors demand for bearing interest rate risk.
(See Refer to page 217)
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| Liquidity Premium | The portion of a nominal interest rate or bond yield that represents compensation for lack of liquidity.
(See Refer to page 219)
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| Maturity | Specified date at which the principal amount of a bond is paid.
(See Refer to page 194)
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| Nominal Rate of Interest | The stated rate of interest applied to your investment.
(See Refer to page 214)
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| Note | Unsecured debt, usually with a maturity under 10 years.
(See Refer to page 204)
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| Protective Covenant | Part of the indenture limiting certain transactions that can be taken during the term of the loan, usually to protect the lender's interest.
(See Refer to page 206)
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| Real Interest Rate | The nominal interest rate minus the rate of inflation.
(See Refer to page 214)
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| Registered Form | Registrar of company records ownership of each bond; payment is made directly to the owner of record.
(See Refer to page 204)
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| Retractable Bond | Bond that may be sold back (put) to the issuer at a prespecified price before maturity.
(See Refer to page 211)
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| Sinking Fund | Account managed by the bond trustee for early bond redemption.
(See Refer to page 205)
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| Stripped Bond | A bond that makes no coupon payments, thus initially priced at a deep discount.
(See Refer to page 210)
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| Term Structure of Interest Rates | The relationship between nominal interest rates on default-free, pure discount securities and time to maturity; that is, the pure time value of money.
(See Refer to page 216)
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| Yield to Maturity (YTM) | The market interest rate that equates a bond's present value of interest payments and principal repayment with its price.
(See Refer to page 194)
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2002 McGraw-Hill Higher Education