What is a bond indenture provision?

What is a bond indenture provision?

It specifies the important features of a bond, such as its maturity date, the timing of interest payments, method of interest calculation, callability, and convertible features, if applicable. A bond indenture also contains all the terms and conditions applicable to the bond issue.

What are bonds instruments?

A bond is a fixed-income instrument that represents a loan made by an investor to a borrower (typically corporate or governmental). A bond could be thought of as an I.O.U. between the lender and borrower that includes the details of the loan and its payments.

What is a bond classified as?

A bond is a debt obligation, like an Iou. Investors who buy corporate bonds are lending money to the company issuing the bond. In return, the company makes a legal commitment to pay interest on the principal and, in most cases, to return the principal when the bond comes due, or matures.

What are the contents of a bond?

Bonds have 3 major components: the face value—also called par value—a coupon rate, and a stated maturity date. A bond is essentially a loan an investor makes to the bonds’ issuer.

Who is involved in a bond indenture?

Thus, we can say there are three persons involved in the bond indenture, namely the issuer, the bondholder, and the fiscal agent/trustee.

What are the five features of bonds?

Key Features of Bonds. Most bonds have five features when they are issued: issue size, issue date, maturity date, maturity value, and coupon. Once bonds are issued, the sixth feature appears, which is yield to maturity.

Which of the following are included in a bond indenture?

A bond indenture is a legal document that outlines all the parameters of the bond issue, such as the par amount, issuer, coupon rate, security pledge, and the rights of bondholders. When analyzing a bond, it is important to review the credit risk of the issuer – the entity legally obliged to repay the bondholders.

What are the 3 components of a bond?

Which of the following information Cannot be found in a bond’s indenture?

Which of the following information cannot be found in a bond’s indenture? The price of the bond. Bonds issued by US states or local governments are called… Municipal bonds.

What are the three components of a bond?

What are the parts of the bond?

What are the 5 characteristics of a bond?

Characteristics of bonds

• Face value. Corporate bonds normally have a par value of $1,000, but this amount can be much greater for government bonds.
• Interest.
• Coupon or interest rate.
• Maturity.
• Issuers.
• Rating agencies.
• Tools and tips.

What is bond indenture What are some contents of a bond indenture?

What types of restrictions should appear in a bond indenture?

Protective covenants usually provide at least the following provisions:

• pay the interest and principal of its bonds.
• specify when bonds can be presented for payment.
• maintain the collateral in good condition.
• insure the collateral against loss.
• defend the legal title to the property.

What is a bond indenture?

Bond Indenture, also known as bond resolution, is is a core legal document that acts as a contract between the bond issuer and bondholder and contains all the details related to the bond, like details of the issue, purpose of issue, obligations of the issuer of bond & rights of bondholders.

Is an indenture a legal contract?

An indenture is a legal contract. A bond indenture is a contract attached with a bond between the issuer and the bondholder. It typically involves a third-party guarantor such as a financial institute or bank that acts as a trustee. A bond indenture specifies the terms and conditions of the bond.

What is the difference between indenture and debenture?

Don’t get the terms indenture and debenture confused. A bond indenture is the contract between the bond issuer and the bondholder. A bond debenture is simply and unsecured bond.

What should be included in an indenture?

Generally, an indenture would include the following details: The contract details the reasons why the issuer is issuing the bond. The indenture mentions the rate of interest or coupon rate applicable to the bonds and their payment frequency. This interest rate is given on the face of the bond.