Exam 19: Corporate Bond Pricing, Market Development, and Financing Strategies

Between 1995 and 2009 the value of bonds outstanding issued by U.S. financial and nonfinancial companies more than quadrupled from $2.5 trillion to more than $11.6 trillion.

Most term loans offered by U.S. banks are priced as:

When interest rates are increasing, business loan rates will rise the fastest under the prime-plus method rather than the times-prime method of bank loan pricing.

The majority of funds used by business firms to finance their working capital and investment needs come from:

One of the distinguishing hallmarks of U.S. corporate debt markets is their ability to provide funds to businesses from start-up to mature companies.

Corporate bonds which resemble a lease in form are called equipment trust certificates.

Please define each of the following terms having to do with business borrowing:

Using the the description or the definition below, identify each of the key terms and concepts presented in this chapter a. Placing corporate debt securities with one or a limited number of investors. b. A form of corporate takeover in which the management of a company or a small group of investors takes over ownership in an effort to boost earnings and payoff any debt incurred in the takeover. c. Examples include the prime rate and LIBOR. d. A debt instrument used to provide financing for business ventures involving the purchase or construction of land and buildings.

Businesses usually derive a majority of the funds they need for daily operations and for long-term capital investment from the money and capital markets; a lesser proportion of their total need for funds comes from internally generated cash.

In February 2009 the average maturity of commercial and industrial loans, weighted by loan amount, was 700 days.

A rise in stock trading volume generally makes stock-indexed corporate bonds more attractive to investors according to the textbook.

Indexing affects the price of a corporate debt security but not its annual interest rate.

Some of the most active players in the Euro junk bond markets are:

Recent revisions in the SEC's Rule 144a have decreased the interest of investment banks in entering the private placement market to provide underwriting services.

Bond brokers commit themselves to take on large blocks of bonds and earn their profit on the spread between the buying and selling prices.

The contract accompanying a bond that lists the rights, privileges and obligations of the borrower and investor is known as a (an):

Since 1990 life insurance companies have sharply curtailed their purchases of privately placed securities due to public pressure on life insurers to strengthen their balance sheets.

Please supply a definition for each of the following terms:

The trading of bonds on organized exchanges is older and even more fully developed than organized exchange stock trading.

A leveraged buyout is: