A Corporate Bond is a debt instrument issued by a private corporation, as distinct from one issued by a government agency or a municipality. Corporate bonds typically have three distinguishing features: they are taxable, have a par value of $1,000, and have a fixed maturity.
A debt instrument is a document used to raise non-equity finance, typically consisting of a promissory note, bill of exchange, or any other legally binding bond.
The effective interest rate is a key financial metric calculated from the purchase price of a debt instrument. It provides a more precise measure of the actual yield on a bond compared to the face interest rate or coupon rate.
Federal Agency Issues or Federal Agency Securities are debt instruments issued by agencies of the federal government that hold high credit ratings due to their sponsorship by the U.S. government.
A debt instrument issued by a municipality to finance assets, which are then leased to private industrial businesses to promote local economic development.
Legging-In refers to entering into a hedging contract after becoming the debtor or creditor under a debt instrument. Any gain or loss from legging-in is deferred until the qualifying debt instrument matures or is disposed of in the future.
Legging-out refers to the process of disposing of one or more unmatured elements of a qualified hedging transaction. Any gain or loss from legging-out is deferred until the qualifying debt instrument matures or is disposed of in the future.
A bond with a maturity of 2 to 10 years, considered to be between short-term and long-term bonds in terms of maturity and risk.
The principal sum refers to the core amount of a debt or financial obligation. In finance, it is the initial amount of money borrowed without interest. In insurance, it designates the amount specified to be paid to the beneficiary under the policy, such as the death benefit.
A promissory note is a negotiable instrument that contains a written promise to pay a specified sum of money to a named person, their order, or the bearer at a predetermined future date. It must be unconditional, signed by the maker, and delivered to the payee or bearer.
An unsecured debenture is a type of debt instrument that is not backed by any specific collateral, relying instead on the creditworthiness and reputation of the issuer.
