Wednesday, 18 January 2012

Glossary - Fixed Income

1. Sinking Fund Provision: It requires that the issuer to retire the fixed portion of bond's principal each year.

2. Accelerated Sinking Fund Provision: It allows the issuer to retire more than the amount that is stipulated by the Sinking Fund Provisions.

3. Redeemed: Bonds are redeemed when they are called through a call option or sinking fund provisions.

4. Refunded: Bonds are refunded whey they are called using the funds obtained through issuing lower coupon bonds.

5. Convertible Bond: A convertible bond is an issue that provides the investor the option or right to convert the bond into a specified number of shares of common stock.

6. Exchangeable Bond: An exchangeable bond provides the investor the option to exchange the bonds for a fixed number of shares of common stock of a company other than the issuer of the bond. 

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