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5 June, 01:05

The interest rate specified in the bond indenture is called the

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  1. 5 June, 04:44
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    contract rate

    Explanation:

    The contract rate of a bond is simply its coupon rate. The bond indenture is the contract between the bond issuer and the bond buyer where all conditions are specified, e. g. maturity date, obligations of the bond issuer, interest rate (contract rate).

    The term contract rate is used as a legal formality since all bonds should be sold with a contract.

    Sometimes we assume that normal trading operations don't need a lot of paperwork but indeed that is completely wrong. For example, every security issued by a government (the US or foreign) comes with a dossier that includes a thorough analysis of the country's economy.
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