A type of debt or promissory note issued by the borrower that promises to pay its holder a predetermined and fixed amount of interest per year and the par value or face amount at the maturity date(greater than one year).
Tangible assets such as inventory, real estate, machinery, equipment, and vehicles.
Non-physical assets such as bonds, preferred stock and common stock that derive their value from a contractual claim on future cash payments or other economic units.
Original date the bond was issued.
Date at which the borrowing entity is committed to repay the principal (par value).
Face amount that will be repaid by the issuing entity at the time the bond matures.
Cash paid either annually or semi-annually to the investor.
Coupons or interest payment
A fixed interest rate paid per annum.
An optional retirement provision that permits the issuing entity to redeem a debt issue prior to its maturity at a specified price (called a redemption or call price).
an option that entitles the bondholder to sell (“put”) the bond back to the issuer before maturity at a predetermined price.
An account where a certain amount of money is set aside annually into it to repay bonds at their maturity date.
Debt with a conversion feature that allows the holder at his or her option to exchange the debt for the issuing company’s common stock at a predetermined price (conversion price).
A legal agreement between the entity issuing the bonds and the bond trustee who represents the bondholders.
Opinions of the relative credit risk of fixed-income securities with an original maturity date of one year or more.
States that long-term interest rates are a function of expected future (“forward”) short-term interest rates.
States that the required returns on long-term securities tend to be greater the longer the time to maturity.
Liquidity (maturity) premium theory
States that interest rates within each maturity segment are determined by the supply and demand of that segment’s borrowers and lenders.
Market segmentation theory
The intrinsic or economic value of any asset can be found by calculating the present value of all future cash flows generated by the asset.
Certifies equity or ownership in a corporation.
PV of all future cash flows that the shareholder expects to receive.