Explain the use of a sinking-fund provision. How can it reduce the investor’s risk?  What are protective covenants? Why are they needed? Explain the use of call provisions on bonds. How can a call provision affect the price of a bond? Explain the use of bond collateral, and identify the common types of collateral for bonds. What are debentures? How do they differ from subordinated debentures?  What is a bond indenture? What is the function of a trustee with respect to the bond indenture? What are the advantages and disadvantages to a firm that issues low- or zero-coupon bonds?

Q: What effect do interest rates have on bond prices? What are the underlying assumptions that go into…

A: Bond: Bond refers to debt security issued by the company from the debt investors to raise capital.…

Q: What does the call provision for a bond entitle the issuer to do?

A: The call provision for a bond is a feature that allows the issuer, which is typically a corporation…

Q: c. Which yield might investors expect to earn on these bonds, and why?

A: Bond yield is the expected return on an invested bond. It is the discount rate which calculates its…

Q: less convex than otherwise similar securities without a p

A: Step 1 A putable bond is a form of bond in which the holder (investor) has the right but not the…

Q: In general, If you consider investing a bond, how is the issuer and guarantor information relevant…

A: Investors have different options to make investments, and the motive behind investments is to…

Q: immunization of a bond portfolio

A: Immunization is a risk-reduction approach that aligns asset and liabilities duration to protect…

Q: what is the difference between an investment grade bond and a junk bond?

A: Solution:- There are various companies like S&P etc, which give credit ratings to the companies…

Q: bonds

A: Municipal bonds that are issued by the respective city or local governments. These bonds are…

Q: Should financial institutions invest in junk bonds?

A: The answer for the theory question on junk bonds is discussed hereunder.  Dear student,  As you have…

Q: How does the carrying value of a bond gets amortized when selling it at discount?

A: The carrying value of bond represents the amount of Bond Face Value + unamortized premium (or )–…

Q: How do putable and callable bonds trade relative to a similar security without an embedded option?…

A: A callable bond is a type of bond which can be redeemed before the maturity date by the issuer at…

Q: If you are an investor will you choose to investment in bonds? Why?

A: Bond is a debt security.

Q: What are some common challenges or complexities associated with bond amortization?

A: Bond amortization refers to the systematic allocation of the premium or discount on a bond over its…

Q: Explain the effect Serial Bonds have on risk from both the perspective of the bond issuer and from…

A: A Serial Bond is that bond issue in which there is maturity, at regular intervals, of a portion of…

Q: 5. What is the difference between a general obligation bond and a revenue bond and what the…

A: General obligation bonds are municipal bonds that are backed by the state or local government. These…

Q: what is difference between a bond and a term loan? what are the advantages of a term loan over a…

A: A bond is a fixed-income security that speaks to credit to a borrower (normally corporate or…

Q: What is outstanding bond?

A: Bond: It can be defined as the loan given to a business or any other organization by the investor…