Bond worksheet and answers

• Corporate bond 1


  A UK company issues a bond paying 2% coupons half-yearly with redemption in 2024. The bond is issued in the UK in £Sterling.
• Corporate bond 2


  A French company issues a bond in Germany, denominated in Euros which pays 5% coupons annually, with a redemption date of 2022.
• Corporate bond 5


  A US company issues a bond out of Paris and London in $US. The bonds pay regular half-yearly coupons.
• Corporate bond 3


  A UK company issues a bond in the UK in £Sterling. The bond pays fixed coupons until 2018 when the bond pays 0.5% above LIBOR until 2021.
• Corporate bond 4


  A US company issues a bond in $US out of London with a redemption date in 5-years. The bond pays fixed coupons until 2019 when it pays 1.9% above fed funds rate.
• Corporate bond 6


  La Poste issues a bond to UK investors in £Sterling. The bond is called "6.125% Bonds 2020"
• Nohope plc unable to repay bonds in 2017

  Bonkers Bank will meet the obligation to repay the loans due to the Guarantee
• Bondholder chooses for Nohope plc to repay bond on 5 April 2016


  Prevailing interest rates rise above 4% making the 4% fixed coupon less attractive
• Nodirection plc unable to repay bond at maturity

  Bondholders can begin a legal claim on the assets of the company (essentially calling a bankruptcy)
• Fixed Charge


  A specific asset, such as the head office of the company, or a particular factory, provides the security for the loan
• Floating Charge


  General assets of the company are offered as security for the loan, which might include the company's cash at the bank, trade debtors and unsold stock
• Third Party Guarantee


  A guarantee from another organisation or individual that if the issuer defaults, they will repay the bondholders e.g. A bank
• The greater the value of the security offered relative to the amount borrowed, the lower the cost of borrowing should be