Question

Choose the appropriate letter to match the term and the definition. Not all definitions will be used.

Term:

1. _____ Convertible

2. _____ Carrying value

3. _____ Discount

4. _____ Callable

5. _____ Maturity

6. _____ Market interest rate

7. _____ Stated interest rate

8. _____ Premium

Definition:

A. A bond feature that changes the interest rate on the bond with market conditions.

B. When a bond is issued for a price less than its face value.

C. Also known as the face value or par value of a bond.

D. A bond with the feature that allows creditors to exchange the bond for company stock.

E. The interest rate printed on the bond certificate.

F. A bond with the feature that lets creditors examine financial data and demand new loan conditions.

G. The amount a company receives when it sells a bond; also known as issue price.

H. When a bond is issued for a price greater than its face value.

I. A bond with the feature that allows the borrowing company to pay off a bond whenever it wishes.

J. Rate of interest that investors demand from a bond.

K. The time at which the face value of a bond must be paid to the lender.

L. Is multiplied by the market interest rate to calculate the (effective) interest expense on a bond.

Answer

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