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- A bond's 1 is generally $1,000 and represents the amount borrowed from the bond's first purchaser. - A bond issuer is said to be in if it does not pay the interest or the principal in accordance with the terms of the indenture agreement or if it violates one or more of the issue's restrictive covenants. - A bond contract feature that requires the issuer to retire a specified portion of the bond issue each year is called a - A bond's gives the issuer the right to call, or redeem, a bond at specific times and under specific conditions. Suppose you read an article about the Golden Gate Bridge and Highway District bonds. It includes the following information: Bridge Bonds Series A Dated 7-15-2005 4.375\% Due 7-15-2055 @100.00 What is the coupon interest rate of this bond? 4.375% 0.435% If the price of the bond is initially discounted and offers no coupon payments, the bond is called a bond. Which feature of a bond contract allows the issuer to redeem bonds under specified terms prior to maturity? Deferred call provision Put provision Call provision Convertible provision When are issuers more likely to call an outstanding bond issue? When interest rates are higher than they were when the bonds were issued When interest rates are lower than they were when the bonds were issued 4. Convertible bonds, warrants, and other exotic bond features As the name suggests, convertible bonds allow the owner the option to convert the bonds into a fixed number of shares of common stock. Jorge bought APJ Inc.'s convertible bond at par ($1,000) with a yield of 3.25%. This bond had a conversion ratio of 25:1 at the price of $40 per share. If APJ Inc.'s shares are currently trading at $48 per share, should Jorge convert his bond into shares? Which of the following are most likely to have higher yields? Nonconvertible bonds Convertible bonds Consider the case of an investor, Nazim: Nazim wants to include bonds in his investment portfolio, but he wants the option to sell the bond to the issuer at a specified price at a certain date before the maturity of the bond. Which of the following bond redemption features should he pick? Putable bond Convertible bond Nazim also recently bought bonds with a clause stating that interest will be paid only when the company has enough earnings to pay for it. Nazim has invested in

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