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LONG TERM DEBT, PREFERRED STOCK, AND COMMON STOCK

Features of Bond:

1.Par Value: Par value for a bond

represents the amount to be paid thelender at the bonds maturity. It is alsocalled face value or principal. Par value isusually $1,000 per bond (or somemultiple of $1,000). With the maore!ception of a "ero#coupon bond, most

bonds pay interest that is calculated on thebasis of the bonds par value. (he facevalue of a stoc% or bond).

2.Coupon Rate: he stated rate of intereston a bond is referred to as the couponrate. &or e!ample, a 1' percent couponrate indicates that the issuer ill pay

bondholders $1'0 per annum for every1,000#par#value bond that they hold.

3.Maturity:*onds almost alays have astated maturity. his is the time hen the

company is obli+ated to pay thebondholder the par value of the bond.

Trustee: person or institutiondesi+nated by a bond issuer as the officialrepresentative of the bondholders.ypically, a ban% serves as trustee.

Indenture: he le+al a+reement, alsocalled the deed of trust, beteen the

corporation issuin+ bonds and thebondholders, establishin+ the terms of thebond issue and namin+ the trustee.

Debenture: lon+ term, unsecured debtinstrument.

ubordinated Debenture: lon+#term, unsecured debt instrument ith

a loer claim on assets and incomethan other classes of dent %non as

unior debt.

In!o"e Bond: bond here thepayment of interest is contin+ent uponsufficient earnin+s of the firm.

#un$ Bond: hi+h#ris%, hi+h#yield(often unsecured) bond rated beloinvestment +rade.

Mort%a%e Bond: bond issuesecured by a mort+a+e on the issuers

property.

&'uip"ent Trust Certifi!ate: nintermediate to usually issue by atransportation company such as a

railroad or airline that is used tofinance ne e-uipment.

in$in% Fund: &und established toperiodically retire a portion of asecurity issue before maturity. hecorporation is re-uired to ma%e

periodic sin%in+#fund payments to atrustee.

Sinking fund of bond can take

two forms:

i) he corporation can ma%e cashpayment to trustee hich intern callsthe bond for retention at the sin%in+fund call price.

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ii)he second option available to issuin+fund is to purchase the bond in the openmar%et and to deliver the +iven number of

bonds to the trustee.

Balloon Pay"ent: payment on debt

that is much lar+er than other payments.he ultimate balloon payment is the entireprincipal at maturity.

(/oan interest)#fi!ed amount (at last payment)########################################################2 fi!ed amount

Periodic payment *alloon Payment

erial Bonds: n issue of bonds ithdifferent maturities, as distin+uished froman issue here all the bonds have

identical maturities (term bonds).

Call Pro(ision: feature in an indenturethat permits the issuer to repurchasesecurities at a fi!ed price (or a series offi!ed prices) before maturity3 also calledcall feature.

Call Pri!e:he price at hich a security

ith a call provision can be repurchasedby the issuer prior to the securitysmaturity.

When Call price>Market price open

market techniques requires.

When Call price

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Ma/ority0Rule Votin%: method ofelectin+ corporate directors, here eachcommon share held carries one vote foreach director position that is open3 alsocalled statutory votin+.

Cu"ulati(e Votin%: method of electin+corporate directors, here each commonshare held carries as many votes as thereare directors to be elected and eachshareholder may accumulate these votesand cast them in any fashion for one ormore particular directors.

Duel0Class Co""on to!$:o classesof common stoc%, usually desi+nated

5lass and 5lass *. 5lass is usuallythe ea%er votin+ class, and 5lass * isusually the stron+er. cumulative featureill or% only three years.

Refundin%::eplacin+ an old debt issueith a ne one, usually to loer theinterest cost.

Call Pre"iu": he e!cess of the callprice of a security over its par value. (5allprice 7 Par value).

Cu"ulati(e Di(idend: ;ividend onpreferred stoc% that ta%es priority overdividend payments on common stoc%.;ividends may not be paid on thecommon stoc% until all past dividends onthe preferred stoc% have been paid.

Con(ertibility: convertibilityfeature permits preferred stoc%holdersto convert their preferred into sharesof common. Preferred stoc%s that

permit this are called convertiblepreferred.

eneral Cas ffers:It involves thesale of securities to all interestedinvestors3 that is, they are publicissues offered to any investor.

public issue, unless very small, mustbe re+istered ith the 6