Investopedia

Continue to Site »

Bond Purchase Agreement

Filed Under »
Dictionary Says

Definition of 'Bond Purchase Agreement'

A legally binding document between a bond issuer and an underwriter establishing the terms of a bond sale. The terms of a bond purchase agreement will include sale conditions, sale price, bond interest rate, bond maturity, bond redemption provisions, sinking fund provisions and conditions under which the agreement may be canceled. After the issuer delivers the bonds to the underwriter and the underwriter pays the issuer for them, the underwriter will put the bonds on the market at the price and yield established in the bond purchase agreement and investors will purchase the bonds from the underwriter. The underwriter collects the proceeds from this sale and earns a profit based on the difference between the price at which it purchased the bonds and the price at which it sells the bonds.
Investopedia Says

Investopedia explains 'Bond Purchase Agreement'

A bond purchase agreement has many conditions. For example, it should require that the issuer not take on any other debt secured by the same assets that will secure the bonds the underwriter is selling, and it should require that the issuer notify the underwriter of any adverse change in the issuer's financial position. The bond purchase agreement also guarantees that the issuer is who it says it is, that it is authorized to issue bonds, that it is not the subject of a lawsuit and that its financial statements are accurate.

Articles Of Interest

  1.

    The Advantages Of Bonds

    Bonds contribute an element of stability to almost any portfolio and offer a safe and conservative investment.

  2. Bond ETFs: A Viable Alternative

    Discover the advantages of a security that tracks bond index funds, but trades like a stock.

  3. Why Bad Bonds Get Good Ratings

    Credit ratings are not the only tool to rely on when assessing bonds. Find out why they sometimes fall short.

  4. Asset Allocation In A Bond Portfolio

    An investor's fixed-income portfolio can easily beat the average bond fund. Learn how and why!

  5. What Is A Corporate Credit Rating?

    Is the bond you're buying investment grade, or just junk? Find out how check the score.

  6. Investing In IPO ETFs

    Learn the history, rules and risks of investing in IPO exchange-traded funds.

  7. How are share prices set?

    When a company goes public though an initial public offering (IPO), an investment bank evaluates the company's current and projected performance and health to determine the value of the IPO for ...

  8. A Primer On Preferred Stocks

    Offering both income and relative security, these uncommon shares may work for you.

  9. Is Insurance Underwriting Right For You?

    If you have excellent analytical skills and an eye for detail, this may be your calling.

  10. The Appeal Of Company Spinoffs

    Companies are increasingly turning to spinoffs for a variety of reasons, including improving performance.
comments powered by Disqus
Marketplace
Hot Definitions

  1. Validation Period

    The amount of time necessary for the premium on an insurance policy to cover the commissions, the cost of investigation, medical exams and other expenses associated with the issuance of the policy.

  2. Winner's Curse

    Because of incomplete information, emotions or any other number of factors regarding the item being auctioned, bidders can have a difficult time determining the item's intrinsic value. As a result, the largest overestimation of an item's value ends up winning the auction.

  3. Glocalization

    A combination of the words "globalization" and "localization" used to describe a product or service that is developed and distributed globally, but is also fashioned to accommodate the user or consumer in a local market.

  4. Disaster Loss

    A special type of tax-deductible loss, similar to a casualty loss, where a loss has been incurred by taxpayers who reside in an area that has been designated as a federal disaster area by the President.

  5. Fool In The Shower

    The notion that changes or policies designed to alter the course of the economy should be done slowly, rather than all at once.

  6. Pattern Day Trader

    An SEC designation for traders who trade the same security four or more times per day (buys and sells) over a five-day period, and for whom same-day trades make up at least 6% of their activity for that period.
Trading Center