Exercises

1. Find in the text Ukrainian equivalents to the following words and word combinations and translate the sentences in which they are used.

Capital markets; mortgage; capital structure; proceeds of the sale; to reach maturity; exchange's board; the coupon rate; claim on the assets; fixed income instruments; bearer bonds; a ledger; Treasury notes; a superior claim on the assets; municipal bonds; pledged as security; backed by the "full faith and credit" of the issuer; callable; a number of variables; to seize assets; to spell out the terms of the bond; to be leery of the securities; stimulated by increased interest-rate variability; to share in the firm's fortunes ; treasury bonds ; unsecured bond; general obligation bond; conversion ratio; to pay interest semiannually; at the discretion of the bondholder; perforation.

2. Find in the text English equivalents to the following words and word combinations. Write your own sentences using them.

Іменна облігація; бездокументарній метод реєстрації активів; фінансувати своє зростання за рахунок боргових зобов’язань або акцій; наступні продажі; володіння акціями; для забезпечення ефективної та правової роботи біржі; номінальна вартість; довгострокові державні цінні папери та облігації; найвищий ступінь анонімності; виплата відсотків проводиться за допомогою чеку або їх записом на поточний рахунок власника; виплата (погашення); платний міст; облігації з заниженим рейтингом; важка техніка; вкладати кошти у фінансові установи; бути описаним у контракті на випуск облігацій; матеріальний; контракт на випуск облігацій; облігація акціонерної компанії; звільняти від федеральних податків; забезпечена облігація; облігації, забезпечені обладнанням; високоприбуткова, але дуже ризикована облігація.

3. Here are some word-combinations from the text. Match and translate them into Ukrainian.

1.	the coupon	a.	method
2.	the book entry	b.	security
3.	pledged as	c.	ratio
4.	to share in	d.	claim
5.	conversion	e.	the firm's fortunes
6.	ownership	f.	rate

4. Match the sentence beginnings (1- 5) with the correct endings (a –e).

1. The U.S. Treasury issues notes and bonds

2. Bearer bonds, for example, belong to the person

3. If the repayment terms of a bond are not met,

4. The coupon rate is the rate of interest

5. Equipment trust certificates are bonds secured by

1. the holder of a bond has a claim on the assets of the issuer.

2. to finance the national debt.

3. that the issuer must pay.

4. who holds them and ownership is not otherwise recorded.

5. tangible non-real-estate property, such as heavy equipment or airplanes.

5. Match words and phrases in the box with their definitions.

1.	Covenant	a.	a contract in which the writer (seller) promises that the contract buyer has the right, but not the obligation, to buy or sell a certain security at a certain price (the strike price) on or before a certain expiration date, or exercise date.
2.	Revenue bond	b.	a bond with a low rating.
3.	Junk bond	c.	a bond issued by a municipality to finance either a project or an enterprise in which the issuer pledges to the bondholders the revenues generated by the operation of the projects financed.
4.	Treasury notes	d.	assets pledged as security for a loan.
5.	Mortgage bond	e.	a debt security, issued by a government or large company, that is not secured by an asset or lien, but rather by the all issuer's assets not otherwise secured.
6.	Unsecured Bond	f.	the contract that accompanies a bond and specifies the terms of the loan agreement.
7.	Indenture	g.	a clause in a loan agreement written to protect the lender's claim by keeping the borrower's financial position approximately the same as it was at the time the loan agreement was made.
8.	Variable-rate bond	h.	the method where the security certificate is not actually given to the holder.
9.	The book entry method	i.	a debt security backed by the full faith and credit of the United States government with a maturity between one and 10 years.
10.	Futures	j.	notewhoseinterest paymentvaries withshort-terminterest rates.
11.	Collateral	k.	involve a financial contract that requires the buyer to purchase an asset (or the seller to sell an asset), such as a physical commodity or a financial instrument, at a specific price on a predetermined date in the future.
12.	Option	l.	long-term bond secured by the payments on one or more mortgages.

5. Fill in the table with the appropriate descriptions of the bond terminology.

1.	Coupon interest rate	a.	The contract that accompanies a bond and specifies the terms of the loan agreement. It includes management restrictions, called covenants.
2.	Current yield	b.	The yield an investor will earn if the bond is purchased at the current market price and held until maturity.
3.	Face amount	c.	The interest rate currently in effect in the market for securities of like risk and maturity. The market rate is used to value bonds.
4.	Indenture	d.	The same as face amount.
5.	Market rate	e.	The maturity value of the bond. The holder of the bond will receive the face amount from the issuer when the bond matures. Face amount is synonymous with par value.
6.	Maturity	f.	The stated annual interest rate on the bond. It is usually fixed for the life of the bond.
7.	Par value	g.	The number of years or periods until the bond matures and the holder is paid the face amount.
8.	Yield to maturity	h.	The coupon interest payment divided by the current market price of the bond.

5. Answer the questions.

1. Contrast investors' use of capital markets with their use of money markets.

2. A bond provides information about its par value, coupon interest rate, and maturity date. Define each of these.

3. The U.S. Treasury issues bills, notes, and bonds. How do these three securities differ?

4. What is the purpose of municipal bonds? Distinguish between general obligation bonds and revenue bonds.

5. What does the phrase backed by the full faith and credit of the issuer mean?

6. What features do corporate bonds share?

7 What is the bond indenture?

8. What is collateral?

9. What are the main types of corporate bonds?

10. Distinguish between mortgage bonds and equipment trust certificates?

11. Define the main types of unsecured bonds.

12. Explain the meaning of speculative-grade bonds (junk bonds)?

13. What financial institutions can provide financial guarantees for bonds?

5. Complete the sentences, using expressions from the box. Translate the sentences into Ukrainian.

Coupons, bearer, bonds, The Internal Revenue Service, registered bonds, mergers, restrictive covenants, moral hazard problem, dividends, interest payments, the bond indenture, bondholders, "coupon interest payment," gets into trouble, the corporation's stockholders.