Flashcards: Understanding Bond Fundamentals — 14 cards

Bond payment frequency — typical?

Most bonds pay semiannually.

Reasons for bond issuance — purpose?

To raise capital without diluting ownership.

Bondholder ownership — rights?

Bondholders are creditors, usually no voting rights.

Payment priority — order?

Bonds paid before stockholders during liquidation.

Bond income taxation — levels?

Subject to federal, state, and local taxes.

Bearer vs registered bonds — difference?

Bearer bonds require coupon clipping; registered bonds record owner info.

Bond certificate features — include?

Maturity date, issuer’s name, owner’s name, coupon rate, payment dates.

Interest payments — frequency options?

Semiannual, quarterly, or annual, depending on bond terms.

Default rights — bondholder?

May gain voting rights if issuer defaults.

Liquidation claims — hierarchy?

Bonds have higher priority than stockholders.

Tax impact — bond income?

Taxed at federal, state, and local levels.

Bearer bonds — security?

Less secure, physical coupons needed.

Registered bonds — ownership?

Owner info recorded, more secure.

Book-entry bonds — recording?

Electronic ownership, no physical certificates.