CSC Chapter 6: Fixed-Income Securities: Features and Types

collateral trust bond

A bond secured by stocks or bonds of companies controlled by the issuing company, or other securities, which are deposited with a trustee.

face value

The value of a bond or debenture that appears on the face of the certificate, ordinarily the amount the issuer will pay at maturity.

instalment debenture

A bond or debenture issue in which a predetermined amount of principal matures each year.

real return bond

A bond where the coupon payments and principal repayment are adjusted for inflation to provide a fixed real coupon rate.

callable bond

A bond that may be redeemed upon due notice by the bond issuer.

strip bond

Usually high quality federal or provincial government bonds where some or all of the interest coupons have been detached and are sold separately.

discount

The amount by which a preferred stock or bond sells below its par value.

coupon rate

The rate of interest that appears on the certificate of a bond.

yield to maturity

The rate of return investors would receive if they purchased a bond today and held it to maturity.

treasury bill

Short-term government debt, issued at a discount to mature at par, in denominations ranging from $1,000 to $1,000,000.

convertible bond

A bond which may be exchanged by the owner for the common stock of the same company.

debenture

A certificate of indebtedness of a government or company backed only by the general credit of the issuer and unsecured by mortgage or lien on any specific asset.

foreign bond

A domestic issuer debt security, issued in another country, denominated in that foreign country’s currency.

bond

A debt instrument secured by a physical asset for which the issuer promises to pay the holder a specified amount of interest based on the coupon rate, for a specified length of time, and to repay the loan on its maturity.

sinking fund

A fund set up to retire most or all of a debt issue over a period of time.

premium

The amount by which a preferred stock or debt security may sell above its par value.

Eurobond

Bonds that are issued in a currency other than the currency of the country where the bond is issued.

foreign pay bond

A domestic issuer debt security issued domestically that pays interest and principal in a foreign currency.