Terms in this set (9)
make periodic Interest and Principal payments over the life of the bond
Call features give the issuer the opportunity to...
replace higher-than-market coupon bonds with lower-coupon bonds
Call provisions give the issuer the right to...
retire all or a part of an issue prior to maturity
What happens when bonds are called
They quit paying interest
Amortizing loans require...
a series of equal payments that cover the periodic interest and reduce the outstanding principal each time a payment is made
Period of call protection
Bondholder is protected from a call over this period
After the call protection period the bonds are referred to as
What happens to the bond price over the time, if the bonds are not called?
The call price declines over time
The bullet bond
is an example of a bond that cannot be redeemed before the date of maturity has arrived. This characteristic separates the bullet bond from a callable bond, in that the bullet bond has a guaranteed interest rate that cannot be changed at any time before maturation. Bullet bonds are usually issued with a lower rate of interest. This is because the bullet bond is considered to be a low risk investment. Because it is not possible to call the bond before the maturation date, there is no opportunity for the applied interest rate to rise or fall. While the interest rate is fixed, the investor will pay for this level of protection. The typical bullet bond is more expensive than callable bonds, where there is some possibility of being impacted by falling market interest rates. For people who are new to investing, the bullet bond can be an excellent way to begin establishing a portfolio of assets. Because the bond maturity date for a bullet bond is fixed, and the rate of interest guaranteed, there is very little risk involved. While the return on the investment will be minimal in most cases, the use of the bullet bond is a practical and safe way to slowly build a credible bank of assets.
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Российская культура (история)
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Capitalizing vs. Expensing
CFA L2 Cash flows, models, formulas, etc
CFA-Derivative Market and instruments