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

A term loan granted by a commercial bank has a minimum maturity of six months and is collateralized by plant and equipment.

The construction of office buildings and shopping centers is generally financed with a/an:

Business fund-raising activity in the money and capital markets tends to be highly stable from one year to the next because, according to your text, businesses generally draft their borrowing and investing plans well in advance; in contrast, consumer and government borrowing is highly unstable.

According to the Federal Reserve's periodic surveys of business loans longer-term loans tend to carry higher average interest rates than short-term business loans.

Most business loans are priced as prime-plus, where the plus reflects default risk and term risk.

Many borrowers in the private placement market have experienced low credit ratings.

Thus far in the 1990s U.S. life insurance companies have:

Private placements:

Securities that are designed to give a company time to strengthen its credit rating or cover cash shortages is called a:

Commercial banks cannot engage in any investment banking.

Mergers and acquisitions (M&A) have been on the ___________ in recent decades due, in part, to a ____________ adopted by federal regulators that reduces the government challenges to M&A.

A bond issue can send "signals" to the marketplace. Whether or not the marketplace perceives a bond issue to be positive or negative depends on the __________ of the issue.

Using the the description or the definition below, identify each of the key terms and concepts presented in this chapter a. A debt instrument with an original maturity of more than 5 years from its date of issue. b. A debt instrument issued by a corporation with an original maturity of 5 years or less. c. A document describing the rights, privileges and obligations of borrower and lender under the terms of a bond or note contract. d. Long-term debt obligations secured only by the earning power of a corporation and not by any of the issuing corporation's specific assets.

Private placements are exempt from registration with the SEC.

Defenses against takeover used by some corporations in recent years, including the taking on of additional debt, are known as poison pills.

One reason call privileges on corporate bonds are declining in usage is the increased availability of hedging instruments.

Most secondary market trading in bonds is conducted over the telephone and through electronic networks.

Commodity-backed bonds are securities backed by collateral that consists of a reserve of internationally traded commodities such as gold, silver or oil.

A security that allows an investor to acquire additional bonds bearing the same yield as the original bond or sell detachable certificates to another investor is called a (or an):

Corporate bonds that pay a return solely due to their price appreciation as they approach maturity are called: