Course outline - Corporate Bonds
Terms
undefined, object
copy deck
- Funded debt-leverage is another way to say.
- Borrowing
- $1,000 par value must be repaid at maturity.
- Principal
- Coupon rate / nominal yeild.
- Interest
- A bond that is trading flat is.
- Company is in default/bankrupt
- Interest in bonds is a fixed charge as percent of $1,000 par value. How often is this payable.
- semi-annually
- When considering the Coupon factor. What two conditions influence the interest rate?
-
Prevailing economy
Issuer's credit rating
the higher the credit rating, the lower the coupon - A bond that is secured by real estate.
- Mortgage Bonds
- A Bond secured by the equipment purchased
- Equipment Trust Certificate
- A bond secured by other stocks and bonds
- Collateral Trust
- A Bond secured by the full faith and credit of issuing corporation (unsecured)
- Debentures
- A bond that pays no interest- bought at a discount.
- Zero Coupon Bond
- A bond may be called prior to maturity if stated in the indenture.
- Callable bond
- A bond is calculated as a percentage of _______ par value.
- $1,000
-
Bond Prices
Point= $___ or _% of 1,000 par value. - $10.00 or 1%
-
Corporate bonds fract ____
Municipal bonds fract ____
Government bonds fract ____ -
1/8
1/8
1/32 -
1/8 of 10 = $________
1/32 of 10 = ________ -
$1.25
$.3125 - When interest rates go up, prices on existing bonds go down. Selling at a ________
- Discount
- When interest rates go down, prices on existing bonds go up. Selling at a _________.
- Premium
-
The term _________ _______ is described by:
- Annual interest(or dividends) divided by current price. - Current Yeild
- Type of bond allowing bond holder to convert to common stock of the corporation.
- Convertible Bond
- U.S. Government Securities where the Gov. has direct Obligations are.
-
Treasury Bills
Treasury Notes
Treasury Bonds
Savings Bonds -
The Government _______ ______
Pays interest semi-annually and has a maturity of usually 10 to 30 years. - Treasury Bond
-
Gov. ________ ______
-interest paid semi-annually
-maturity of 1 to 10 years. - Treasury Note
-
Gov. __________ _____
-Bought at a discount
-Mature in one year or less -
4 wks,13wks,26wks,etc... - Treasury Bill
- U.S. Gov. ________ ______ are not negotiable.
- Savings Bonds
- Two types of Gov. Savings Bonds.
-
Series EE
Series HH - Two Federal Agency Issues not direct, but moral obligations of the U.S. Gov. are.
-
(GNMA)Government National Mortgage Association.
(FHLB) Federal Home Loan Bank - Types of Municipal Securities.
-
-(GO)General Obligation Bonds
-Revenue Bonds
-(IDR)Industrial Development Revenue Bonds. - A Muni bond that is issued by a municipal authority and backed by a corporate guarantor is what type?
- (IDR) Industrial Development Revenue Bond
- A Muni Bond backed by the faith and credit of the issuer. (through taxes)
- (GO) General Obligation Bond
- A muni bond payable from revenues generated by the financed project (toll roads etc.)
- Revenue Bond
- High quality debt instruments with a maturity of one year or less.
- Money Market Securities
- A money market security. short-term, unsecured corporate debt (like a debenture)
- Commercial Paper
-
Money Market Security
bank draft issued upon a letter of credit to facilitate import/export trade. - Bankers Acceptance
-
M.M.S.
Negotiable, unsecured interest-bearing debt security of $100,000 min issued by banks. - Certificate of Deposit
- The most effective of all money market instruments.
- Treasury Bills
- Another money market instrument is a (repos)
- repurchasing agreement
- Two Mortgage backed securities.
-
(CMOs) Collateralized Mortgage Obligations
(REMICs) Real Estate Mortgage Investment Conduits - The Securities Act of 1933 is know as the.
- Act of full disclosure
- Securities act of 1933 established what?
- The registration of Securities.
- While a new security is "in registration" also known as the _______ ___ _______ what may be printed to be sent to potential investors.
-
Cooling-off period
Preliminary Prospectus (Red Herring) - the meeting to assure issue is in complaince with federal and state laws.
- Due Diligence meeting
- Securities Exempt from registration.
-
- Gov. and muni issues
- Intrastate offerings
- Private placements - where a new issue is sold and proceeds go to the issuer.
- Primary Market
- Broker/Dealer which helps corporations or municipalities raise capital by arranging for a new offering of stocks or bonds to be marketed.
- Investment Banker (Underwriter)
- 4 types of underwritings
-
- Firm commitment
- Best efforts
- All-or-none
- Standby -
What underwriting type:
- the issue is purchased from the issuer, marked up and sold to the public. - Firm commitment
-
The underwriting type:
- the issue is not purchased but the underwriters act as agents and attempt to sell all the securities the market will bear at the specific price. - Best efforts
-
Type of underwriting:
- a type of best efforts which is canceled if the entire issue is not sold in a given time period. - All-or-none
-
Types of underwriting:
used in a rights offering - Standby
- Participants in underwriting.
-
- Manager
- Syndicate member
- Selling group - broker/dealer - In underwriting, the broker/dealer awarded the issue is the ___________.
- Manager (lead underwriter)
- In underwriting, other broker/dealers chosen by the manager to participate in the underwriting in a principal (dealer) capacity.
- Syndicate memberf
- In underwriting, the broker/dealers chosen to assist the syndicate in marketing the issue in a broker(agency) capacity.
- Selling group
- Broker/Dealers which provides a secondary market for securities.
- Market Makers
- The markets where outstanding issues are traded.
- Secondary markets
- Types of Secondary markets
-
-Listed Markets
-Over-the-Counter Markets
-InterMarket
-Fourth Market - NYSE,AMEX,reginal exchanges,auction market are examples of what market?
- Listed Market
- Nasdaq-unlisted-negotiated market is what type of market?
- (OTC) Over-the-counter market
- a listed security trading over-the-counter
- Nasdaq intermarket
- Direct institutional trading
- Fourth Market
- OTC market- source of price quotations is.
- The Nasdaq - an automated quotation system
- The Nasdaq level that allows only the highets bid and lowest ask of all market makers - subject quote
- Level 1
- Nasdaq level that lists market makers' firm quotes on price and size.
- Level 2
- Level used by market makers to enter quotes, plus firm quotes available on level 2.
- Level 3
- A _______ represents _______ as their ________ and collect a __________.
-
-Broker
-Others
-Agent
-Commission -
A ________ represents _______
as the ________ _______ (____ ______) at a ________. -
-Dealer
-Selves
-Principal Investor (Market Maker)
-Mark up - Inventory Positions for a Broker/Dealer are known as ______ or _______.
-
Long
Short - The inventory position where the B/D has the security in their inventory is.
- Long
- A cash trade is always settled when?
- On the same day
-
Market Terms:
Date the transaction is settled member-to-member. - Delivery or Settlement Date
- A transaction settlement is said to be the _______ ____ when it is done on the __rd business day after the trade date for ______ and _______ securities and the ________ ____ for U.S. Gov. securities
-
-3rd
-corporate and municipal
-next day -
Market Terms for Dividends:
Date board of directors declares a dividend. - Declaration Date
-
- 2 business days prior to record date for corporations
- Date designated by issuer or underwriter for mutual funds.
- Share price is reduced on this date. - Ex-Dividend Date
- Day the list of entitled stockholders is made.
- Record Date
- Date dividend is paid
- Payment Date
- When a security is delivered in order to be considered a good delivery it must be (4 things)
-
- Certificate in good form
- At the appropriate time
- Properly signed
- Correct number of units - Two types of taxation on securities.
-
Income
Capital gains and losses - Cash dividends from stocks held are treated as ________ income and taxed at ______%.
-
-Ordinary
-15% - Interest from bonds held are taxed as _________ income while Municipal bond interest is ______ ______.
-
-Ordinary
-Tax-free - Distribution for retirement plans are treated as _______ income.
- ordinary
- A capital gain is considered long term after how long?
- a day and a year from trade date.
-
T/F
Losses may be used to offset gains? - True
- The maximum capital loss write-off is $_______ per year of net losses; carryover any excess.
- $3,000
- Two risks with bonds.
-
Interest rate risk
(Money rate)
Purchasing power risk
(Inflation) -
The words
-Prosperity
-Contraction
-Recession
-Expansion
Represent what? - Business Cycles
- Practices followed by the Federal Reserve Board which affect the money supply, interest rates and bond prices is know as the _______ _______.
- Monetary Policy
- The percentage of customer deposits to be maintained in cash.
- Reserve Requirements
- The rate at which member banks can borrow from the Federal Reserve.
- Discount Rate
-
Types of Issues:
seasoned securities with steady earnings and secure dividends are known as. - Blue Chip securities
-
Types of Issues:
A security that makes money in both good and bad times (utilities,supermarkets,clothing, alcohol, tobacco,etc..) - Defensive security
-
Types of Issues:
Wide fluctuations in earnings,dividends, and stock prices based upon business cycles. - Cyclical securities
-
Types of Issues:
bought for capital gains, not income. - Growth
-
Types of Issues:
bought for income,not capital gains. - Public Utilities
- A trust that invests primarily in real estate projects. Can not be sold by a Series 6 Reps.
-
(REIT)
Real Estate Investment Trust - Mutual funds can be owned by _________ name, ________ or ___________ name.
- Individual name, partnership or corporate name.
- Three more forms of Mutual fund ownership are.
-
Joint name
Trust account
Custodian under Uniform Gifts to Minors Act (UGMA)