You Are Considering 2 Bonds That Will Be Issued Tomorrow

question 33

True/False

You are considering 2 bonds that will be issued tomorrow.Both are rated triple B (BBB, the lowest investment-grade rating), both mature in 20 years, both have a 10% coupon, neither can be called except for sinking fund purposes, and both are offered to you at their $1,000 par values.However, Bond SF has a sinking fund while Bond NSF does not.Under the sinking fund, the company must call and pay off 5% of the bonds at par each year.The yield curve at the time is upward sloping.The bond's prices, being equal, are probably not in equilibrium, as Bond SF, which has the sinking fund, would generally be expected to have a higher yield than Bond NSF.

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Default Judgment

A judgment entered by a clerk or court against a party who has failed to appear in court to answer or defend against a claim that has been brought against him or her by another party.

Complaint

A formal legal document filed in court by the plaintiff to initiate a lawsuit, outlining the facts and legal reasons for the claim against the defendant.

Service of Process

The procedure by which a party to a lawsuit gives an appropriate notice of initial legal action to another party (such as a defendant), court, or administrative body, ensuring the court's jurisdiction over the parties to the lawsuit.

Federal Rules

Regulations and procedures set forth by federal law that govern how federal proceedings, such as lawsuits or investigations, are conducted.