Question

True or False

9.An indenture is a bond that is backed by good faith of the company.

10.Default risk is the risk that a company can't make its' interest payments.

11.Subordinated debentures are higher order claimants (i.e. paid out earlier) compared to mortgage bond holders when there is a bankruptcy.

12. A put provision gives the investor the right but not the obligation to sell the bond back to the company.

14. The debenture statement is the legal document that establishes and characterizes a bond's features.

Answer 1

9) true

Between bond issuers and bondholders, anindenture is a legal and binding contract specifying all the important features of abond, such as its maturity date, timing of interest payments, method of interest calculation and callable or convertible features, if applicable

10) true

Default risk is the chance that companies or individuals will be unable to make the required payments on their debt obligations. Lenders and investors are exposed to default risk in virtually all forms of credit extensions.

11) false

subordinated debt (also known assubordinated loan, subordinated bond,subordinated debenture or junior debt) isdebt which ranks after other debts if a company falls into liquidation or bankruptcy

12) true

A put provision is a provision in some bonds which allows the bondholder to resell a bond back to the bond's issuer at par or the face value of the bond before the bond matures

13) true