CFA Level I · CFA Level I Exam · Fixed-Income Instrument Features
A bond's legal contract between the issuer and the bondholders, which sets out the issuer's obligations and the bondholders' rights, is best described as the:
The bond indenture, also called the trust deed, is the legal contract between issuer and bondholders. It sets out the issuer's obligations, the bond's terms and the covenants that protect investors, and it is enforced through a trustee acting for bondholders.
- Abond indentureCorrect
- Bterm sheet
- Cprospectus supplement
Explanation
The indenture (trust deed) is the legal contract that specifies the bond's form, the issuer's obligations and the covenants. A term sheet only summarizes the main terms, and a prospectus supplement adds offering information. Neither is the binding contract itself.
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