Get an Answer
Theories
Previous ArticleThe Role of Arithmetec in Everyday LifeNext ArticleSelect a company with long term bonds outstanding. There are many examples in the textbook. Locate and analyze a current quotaoion for that bond. Use figure 10.2 in the textbook as a guide. Compare the current prece with the par value. Explain at least one (1) reason for the difference. TABLE 10.2 Common elements of Bonds Represent borrowed funds Contractual agreement between a borrower and lender (INDENTURE) Senior claim on assets and cash flow No voting right Par value Having a Bond rating improves the issue’s marketability to investor’s covenants Interest: tax deductible to the issuing firm Usually fixed over the issue’s life but can be variable as the indenture allows coupon rate on new issues affected by market interest rates and bond rating. Maourity: usually fixed; can be affected by convertibility, call and put provisions, sinking fund, extendibility features in the indenture. Security: can have senior claim on specific assets pledged in case of default or can be unsecured(debenture or subordinated [junior claim] debenture)