115 CFA
File: Fixed Income - Reading 42 - 4. Structure of a Bond's Cash Flows

4. Structure of a Bond's Cash Flows

e. describe how cash flows of fixed-income securities are structured;

What is the bullet bond repayment structure?
The issuer pays the full principal amount at the maturity date.

What is the amortizing bond repayment structure?
Amortizing bond. Its payment schedule requires periodic payment of interest and repayment of principal. If the entire principal is not amortized over the life of the bond, a balloon payment is required at the end of the term.

What is a sinking fund arrangement bond repayment structure?
A sinking fund arrangement allows a bond's principal outstanding amount to be repaid each year throughout the bond's life or after a specific date.

What is a call provision structure?
A call provision is the right of the issuer to retire the issue prior to the stated maturity date.

What is an inverse floater bond coupon rate?
An inverse floater's (also called a reverse floater) coupon rate moves in the opposite direction from the change in the reference rate.

What are step-up coupon bonds?
Step-up coupon bonds have low initial and gradually increasing coupon rates; that is, their coupon rates "step up" over time.

What are stepped spread floaters?
The quoted margins for these coupons can step to either a higher or a lower level over the security's life.

What are Credit-linked coupon bonds?
These coupons change when the issuer's credit rating changes.

What are Payment-in-kind coupon bonds?
These coupons allow the issuer to pay coupons with additional amounts of the bond issue rather than in cash.

  • CFA