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A “Need-to-Know” Glossary for all Medical Professionals

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Accrued interest: Interest that has been earned but not received; when a physician purchases a bond from a bondholder, the physician owes the bondholder interest for the period of time the bondholder held the bond. Because interest is paid semi-annually, the period of time that has elapsed is the accrual period. 

Basis point: One one-hundredth of a percent; a measure for interest rates and bond yields. Bearer bond: A bond with coupons attached, evidencing ownership. 

Call feature: The provision in the indenture allowing the issuer to redeem the bond prior to its maturity date.

Convertible bond: A bond that promises that the holder can convert it into stock within a specified period of time at a specified price and specified ratio (a bond equals a given number of shares of stock). 

Coupon rate: The specified interest rate paid by a bond issuer.

Credit rating systems: The classification systems used to indicate the risk associated with a particular bond issue.

Debenture: A debt security that is not secured by a mortgage on a specific asset. It is backed only by the earnings of the issuer, known as full faith and credit.

Default: The failure to pay interest or principal on debt securities when those payments are due. 

Discount: The sale of a bond below its par value. 

Duration: The measure of volatility, expressed in years, taking into consideration all of the cash flows produced over the life of a bond. For example, if the duration of a bond is four years, then the price of the bond changes 4% for every 1% change in interest rates.

Indenture: A formal agreement between the issuer of a bond and the bondholders that specifies the maturity date, interest rate, and other terms.

Interest: The payment the issuer makes to the physician bondholder for the use of the bondholder’s money. 

Maturity: The time at which a debt issue becomes due and the principal must be repaid. 

Principal: The face value of the bond, also known as par value. 

Refunding: The act of issuing new debt and using the proceeds to retire existing debt.

Registered bond: A bond that has its ownership registered with the commercial bank that distributes interest payments and principal repayments. 

Sinking fund: A fund in which money to pay off the debt accumulates; bond issues that have a sinking fund are considered less risky than those without one.

Trustee: The entity, usually a commercial bank that is appointed to ensure that the terms of a bond’s indenture are met. 

Yield: The potential return offered to the bondholder. 

Yield curve: The relationship between yields and dates of maturities of debt securities as plotted on a graph. 

Yield to maturity: The yield earned on a bond from the time it is purchased until it is redeemed. 

Zero coupon bond: A bond that pays both principal and interest at maturity. 

• Related info: www.HealthDictionarySeries.com 
• Note: Feel free to send in your own related terms and definitions so that this section may be updated continually in modern Wiki-like fashion.  

Filed under: Glossary Terms, Investing | Tagged: Investing Basics |