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Description This type of bond is issued to finance a specific asset such as machinery, trains efc and is backed by the asset. This is a bond provision that specfies the annual repayment schedule that will be used to sorvice the bond and pay off the dobt. This term is used to define the provision which alows the bond issuer to sottio the payments towards the bond before the maturity This bond is issued by the U.S. government, whose prinoipal payments are adjusted to proloct mrestor against infation as measured by the Consumer Price Index. This type of bond refers to muricipal bonds that intend to make poyments to its bondholders with the income generated from the project, for which the bond was issued. Understanding How Eonds Work as Investment Vehicles From an investment point of view, bonds are generally considered to be safer investments than stocks, Thery are generally low risk low return Tnveitments, anlike stocks. As an investor in bonds, you would lend money to the issuer of the bonds. It is important to understand what bonds are and how they work as investment vehicles. Suppose a friend of yours is looking to invest $5,000 such that it will provide current income and increase the diversificabon of his assets. He has heard a lot about corporate bends but wants to leam more before purchasing them. Fill in the blanks in the following conversation to g ve your friend the appropriate information regarding corporate bonds: FA1END: Can you explain to me the bosies of how investing in a corporate bond will increase my current income? Yout Under a standard bond agreement; if you were to purchase a 10 year, $5,000 corpoeate bond with a 97 coupon, wou would receive in interest esch year, and at the end of the 10 -year periad, you would receive the par value of FRIEND: OK, and am I guaranteed to receive these interest payments and the par value? YoU: Well, some corporate bonds are issued as debentures, which have standing, meaning that they bscked by a legal claim on some specific property. A special type of corporate bond, known as a bond, comes with a provision allowing you to convert them into a certain amount of stock. FrreND: Are there any other general features 1 should be aware of? You: Corporate bonds can be issued in a wide variety of formis. As far as general features go, they tend to come in denominations of and many have call provisions so that the issuers can't retire the bond (by paying you back and ceasing to pay interest payments) within the first 5 or 10 years of the issue date. Such bonds FRLEND: So if the interest rate were to fall and the issuer were able to retire my bond, I would be. off than if t were to continue holding the bond, because if 1 reinvest the mney the issuer returns to me, I would receive a interest rate. Youi Exactly. in such a case, the iswer would pay you a , but this generally would not fully compensate you for your 10s5. FRIEND: Got it. Thanks for your helol YoUs Any timel FRIEND: OK, and am I guaranteed to recelve these interest payments and the par value? Yout Well, some corporate boads are issued as debentures, which have standing, meaning thst they backed by a legal ctaim on some specific property. A speciaf type of corporate bond, lot bond, comes with a provision allowing you to convert them into a certain amount of stock. FRIENDt Are there any other general features I-should be aware of? FRIEND: OK, and am 1 guaranteed to recelve these interest payments and the par value? YoU: Well, some corporate bonds are issued as debentures, which have standing, meaning that they backed by a legal dalin on some specific property. A special type of corporate bond, known as a bond, co provision allowing you to convert them into a certain amount of stock. FRIENO: OK, and am I guaranteed to receive these interest payments and the par value? YoUi Well, some corperate bonds are issued as debentures, which have stand ing, meaning that they backed by a legol daim on some specilic property. A special type of corporate bond, known as a bond, comes with a provision allowing you to convert them into a certain amount of stock. FRIENDt Are there any other general features 1 should be aware of? FRIENDi Are there any other general features I should be aware of? Youi Corporate bonds can be issued in a wige variety of forms. As for as general features go, they tend to come in denominations of , and many have call provisions so that the issuers can't retire the bond (by paying you back and ceasing to pay interest hin the firmt 5 or 10 years of the iswee date. Such bonds FRIL I interest rate were to fail and the issuer were able to retire my bond, I would be off than if I were to continie ind, because if I reinvest the mney the issuer returns to me, I would recelve a interest rate. FRIEND: Are there any other general features i should be aware of? You: Corporake bonds can be issued in a wide variety of forms. As far as general features go, they tend to come in denominations of , and many harve call provitions so that the issuers can't retire the bond (by paying you back and ceating to pay interest payments) within the first 5 or 10 years of the issue date. Such bond FMIEND: So if the interest rate were to fall aad the issuer were able to re off than if t were to continue bolding the bend, because if I reimvett the money the issuer returns tf inerest rate. FRIENDi 50 if the interest rate were to fall and the issuer were able to retire my bond, 1 would be off than if I were to continue holding the bond, because if 1 reinvest the money the issuer retums to the, 1 would receive a interest rate. youi fixactly, In such a case, the issuer would pay you a but this gen d not fuliy compensate you for your loss. FRIEND: So if the interest rate were to fall and the issuer were able to retire my bond, I would be off than if I were to continue holding the bond, because if I reinvest the monney the issuer returns to me, 1 would receive a interest rote. Youi Exactly, In such a case, the iswuer would pay you a bet this ge loss ald not hully compensate you for your psyments) within the first 5 or 10 years of the issue o FRIEND: So if the interest rate were to fali and the issue repayment premium bond, I would be holding the bond, because if 1 reinvest the money the You: Exactly, In such a case, the issuer would pay you a loss. , but this generally would not fully compensate you for your FRIENO: Got it, Thanks for your helgl You: Any timel Select the term associated with bonds that corresponds to each of the given descriptions. (Hint: These are not necessarily camplete derinitions, but there is only one possible answer for each description.) Description Term This type of bond is issued to finance a specific asset such as machinery, trains etc. and is backed by the asset. This is a bond provision that specifies the annual repayment schedule that will be used to service the bond and pay off the debt This term is used to define the provision which allows the bond iswuer to settle the paymenks towards the bond betore the maturity This bond is issued by the U.S. government, whose principal payments are adjustod to protect investors opainst inflation as measured by the Conwumer Price Index. This type of bond refers to municipal bands that intend to make payments to its bondholders with the income generatod from the project, for which the bond was issued. Understanding How Bends Work as Investment Vehicles From an investment point of view, bonds are generally considered to be safer investments than stocks. They are generally low risk low retum investments, unike stocks. As an investor in bonds, you would lend money to the issuer of the bonds. It is important to understand what bonds are and haw they work as investment vehicles. Suppose a friend of yours is looking to itvest $5,000 wuch that it will provide current income and increase the diversification of his assets. He has heard a lot about corporate bonds but wants to leam more before purchasing them. Fill in the blanks in the foliowing conversation to give your friend the appropriate information regarding corpocate bonds. FRIEND: Can you explain to me the basics of how investing in a corporate bond will increase my current income? You: Under a standard bond agreement, if you were to purchase a 10 -yeac, $5,000 corporate bond with a 9% coupon, you would receive in intereit each year, and at the end of the 10 -year period, you would receive the par value of FRIENDI OKi, and am I guaranteed to receive these intereit payments and the par value? Yout weil, some corperate bonds are insued ar debentares, which have Manding, meaning that they claim on soene specific peoperty. A special type of corporate band, known ar a you to comver them into a certain amount of stock. boind, comes with a brovision ahoping FAIEND: Are there any other general features I should be aware of? Yout Corporate bonds can be issued in a wide variety of forms. As tar as general features go, they tend to come in denoeninutions of , and many have call provisions so that the issuers cant retire the bond (by paying you back and ceasing to pay interest payments) within the first 5 or 10 years of the issue date. Such bonds FRtEND: So if the interest rate were to fall and the iswuer were able to retire mmy bond, I would be off than if I were to continue holding the bond, because if I reimvest the maney the issuer returns to me, I would receive a interest rate. yout Exactly, in such a case, the issuer would pay you a , but this generally would not fully compensote you far your 105sin Pateror cout it. Thanka for wour help1 YoU Any timel Description This type of bond is issued to finance a specific asset such as machinery, trains efc and is backed by the asset. This is a bond provision that specfies the annual repayment schedule that will be used to sorvice the bond and pay off the dobt. This term is used to define the provision which alows the bond issuer to sottio the payments towards the bond before the maturity This bond is issued by the U.S. government, whose prinoipal payments are adjusted to proloct mrestor against infation as measured by the Consumer Price Index. This type of bond refers to muricipal bonds that intend to make poyments to its bondholders with the income generated from the project, for which the bond was issued. Understanding How Eonds Work as Investment Vehicles From an investment point of view, bonds are generally considered to be safer investments than stocks, Thery are generally low risk low return Tnveitments, anlike stocks. As an investor in bonds, you would lend money to the issuer of the bonds. It is important to understand what bonds are and how they work as investment vehicles. Suppose a friend of yours is looking to invest $5,000 such that it will provide current income and increase the diversificabon of his assets. He has heard a lot about corporate bends but wants to leam more before purchasing them. Fill in the blanks in the following conversation to g ve your friend the appropriate information regarding corporate bonds: FA1END: Can you explain to me the bosies of how investing in a corporate bond will increase my current income? Yout Under a standard bond agreement; if you were to purchase a 10 year, $5,000 corpoeate bond with a 97 coupon, wou would receive in interest esch year, and at the end of the 10 -year periad, you would receive the par value of FRIEND: OK, and am I guaranteed to receive these interest payments and the par value? YoU: Well, some corporate bonds are issued as debentures, which have standing, meaning that they bscked by a legal claim on some specific property. A special type of corporate bond, known as a bond, comes with a provision allowing you to convert them into a certain amount of stock. FrreND: Are there any other general features 1 should be aware of? You: Corporate bonds can be issued in a wide variety of formis. As far as general features go, they tend to come in denominations of and many have call provisions so that the issuers can't retire the bond (by paying you back and ceasing to pay interest payments) within the first 5 or 10 years of the issue date. Such bonds FRLEND: So if the interest rate were to fall and the issuer were able to retire my bond, I would be. off than if t were to continue holding the bond, because if 1 reinvest the mney the issuer returns to me, I would receive a interest rate. Youi Exactly. in such a case, the iswer would pay you a , but this generally would not fully compensate you for your 10s5. FRIEND: Got it. Thanks for your helol YoUs Any timel FRIEND: OK, and am I guaranteed to recelve these interest payments and the par value? Yout Well, some corporate boads are issued as debentures, which have standing, meaning thst they backed by a legal ctaim on some specific property. A speciaf type of corporate bond, lot bond, comes with a provision allowing you to convert them into a certain amount of stock. FRIENDt Are there any other general features I-should be aware of? FRIEND: OK, and am 1 guaranteed to recelve these interest payments and the par value? YoU: Well, some corporate bonds are issued as debentures, which have standing, meaning that they backed by a legal dalin on some specific property. A special type of corporate bond, known as a bond, co provision allowing you to convert them into a certain amount of stock. FRIENO: OK, and am I guaranteed to receive these interest payments and the par value? YoUi Well, some corperate bonds are issued as debentures, which have stand ing, meaning that they backed by a legol daim on some specilic property. A special type of corporate bond, known as a bond, comes with a provision allowing you to convert them into a certain amount of stock. FRIENDt Are there any other general features 1 should be aware of? FRIENDi Are there any other general features I should be aware of? Youi Corporate bonds can be issued in a wige variety of forms. As for as general features go, they tend to come in denominations of , and many have call provisions so that the issuers can't retire the bond (by paying you back and ceasing to pay interest hin the firmt 5 or 10 years of the iswee date. Such bonds FRIL I interest rate were to fail and the issuer were able to retire my bond, I would be off than if I were to continie ind, because if I reinvest the mney the issuer returns to me, I would recelve a interest rate. FRIEND: Are there any other general features i should be aware of? You: Corporake bonds can be issued in a wide variety of forms. As far as general features go, they tend to come in denominations of , and many harve call provitions so that the issuers can't retire the bond (by paying you back and ceating to pay interest payments) within the first 5 or 10 years of the issue date. Such bond FMIEND: So if the interest rate were to fall aad the issuer were able to re off than if t were to continue bolding the bend, because if I reimvett the money the issuer returns tf inerest rate. FRIENDi 50 if the interest rate were to fall and the issuer were able to retire my bond, 1 would be off than if I were to continue holding the bond, because if 1 reinvest the money the issuer retums to the, 1 would receive a interest rate. youi fixactly, In such a case, the issuer would pay you a but this gen d not fuliy compensate you for your loss. FRIEND: So if the interest rate were to fall and the issuer were able to retire my bond, I would be off than if I were to continue holding the bond, because if I reinvest the monney the issuer returns to me, 1 would receive a interest rote. Youi Exactly, In such a case, the iswuer would pay you a bet this ge loss ald not hully compensate you for your psyments) within the first 5 or 10 years of the issue o FRIEND: So if the interest rate were to fali and the issue repayment premium bond, I would be holding the bond, because if 1 reinvest the money the You: Exactly, In such a case, the issuer would pay you a loss. , but this generally would not fully compensate you for your FRIENO: Got it, Thanks for your helgl You: Any timel Select the term associated with bonds that corresponds to each of the given descriptions. (Hint: These are not necessarily camplete derinitions, but there is only one possible answer for each description.) Description Term This type of bond is issued to finance a specific asset such as machinery, trains etc. and is backed by the asset. This is a bond provision that specifies the annual repayment schedule that will be used to service the bond and pay off the debt This term is used to define the provision which allows the bond iswuer to settle the paymenks towards the bond betore the maturity This bond is issued by the U.S. government, whose principal payments are adjustod to protect investors opainst inflation as measured by the Conwumer Price Index. This type of bond refers to municipal bands that intend to make payments to its bondholders with the income generatod from the project, for which the bond was issued. Understanding How Bends Work as Investment Vehicles From an investment point of view, bonds are generally considered to be safer investments than stocks. They are generally low risk low retum investments, unike stocks. As an investor in bonds, you would lend money to the issuer of the bonds. It is important to understand what bonds are and haw they work as investment vehicles. Suppose a friend of yours is looking to itvest $5,000 wuch that it will provide current income and increase the diversification of his assets. He has heard a lot about corporate bonds but wants to leam more before purchasing them. Fill in the blanks in the foliowing conversation to give your friend the appropriate information regarding corpocate bonds. FRIEND: Can you explain to me the basics of how investing in a corporate bond will increase my current income? You: Under a standard bond agreement, if you were to purchase a 10 -yeac, $5,000 corporate bond with a 9% coupon, you would receive in intereit each year, and at the end of the 10 -year period, you would receive the par value of FRIENDI OKi, and am I guaranteed to receive these intereit payments and the par value? Yout weil, some corperate bonds are insued ar debentares, which have Manding, meaning that they claim on soene specific peoperty. A special type of corporate band, known ar a you to comver them into a certain amount of stock. boind, comes with a brovision ahoping FAIEND: Are there any other general features I should be aware of? Yout Corporate bonds can be issued in a wide variety of forms. As tar as general features go, they tend to come in denoeninutions of , and many have call provisions so that the issuers cant retire the bond (by paying you back and ceasing to pay interest payments) within the first 5 or 10 years of the issue date. Such bonds FRtEND: So if the interest rate were to fall and the iswuer were able to retire mmy bond, I would be off than if I were to continue holding the bond, because if I reimvest the maney the issuer returns to me, I would receive a interest rate. yout Exactly, in such a case, the issuer would pay you a , but this generally would not fully compensote you far your 105sin Pateror cout it. Thanka for wour help1 YoU Any timel

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