A tranche occurs when a bond has a series of maturity dates. Each maturity date is called a tranche.

5) What is meant by a bond yield?

Bond yield can be calculated in two ways. Current yield is calculated as the annual interest payments expressed as a percentage of current market price. The yield to maturity takes into account both the annualized interest payment and also the capital gains or losses that will be experienced by the bond, if held until maturity.

6) How does an investor calculate cash flow?

Cash flow can be approximated from the Income Statement. It can be calculated by taking net income before extraordinary items plus depreciation or amortization or depletion, plus the increase in deferred income taxes, plus minority interest, minus equity income.

7) How can an investor judge the quality of a bond?

Analyses of the financial statements provide a simple method of judging the quality of most investments. Financial statement analysis looks at relationships between Balance Sheet and Income Statement accounts. Some classic ratios for analyzing bond investments are: the debt to equity ratio, the times interest-earned ratio and the asset coverage ratio.

8) What sweeteners can an issuer offer to both bond or preferred stock investors?

Convertibility, retractability, floating rate, or warrants.

9) What is "tilting of the yield curve"?

The yield curve tilts when long term interest rates fall and short term interest rates rise.

10) How is accrued interest, that has not been received by an investor, treated for income tax purposes?

Revenue Canada requires that accrued interest be taxed in the year it is accrued, which may not necessarily be when it was received.

11) What are the main factors that affect bond prices?

The main factors which affect a bond's price are the credit rating of the issuer, the coupon interest rate, the term to maturity and the level of interest rates in the economy.