Investments. Characteristics of bonds (most important)

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Investments. Characteristics of bonds (most important)

Lecture notes, cheat sheets

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BONDS DESCRIPTION

Bond - this is an issue-grade security that secures the right of its holder to receive from the issuer a bond within the period specified by it at its nominal value and a percentage of this value fixed in it or other property equivalent.

Bonds as investment objects:

1) the interest on bonds is constant or changes slightly, is paid on time, regardless of profit;

2) their holders are entitled to the distributed profit and assets of the issuer upon its liquidation;

3) payment of interest within a certain period;

4) by buying a bond, the investor becomes a creditor;

5) the bond does not give the right to vote.

A bond certifies a loan relationship between its owner (creditor) and the person who issued it (borrower).

Bonds are classified:

1) by types of issuers: bonds of internal state loan; bonds of internal local loans; corporate bonds;

2) by maturity: rent; prolonged; intermediate;

3) according to the features of registration and redemption: nominal; bearer;

4) by forms of payment of income: interest; interest-free;

5) by regional affiliation of the issuer: bonds of domestic issuers; bonds of foreign issuers.

A bond has a face value (or nominal price), an issue price, a market price, and a redemption price.

Rated price - the value in monetary units, which is indicated on the bonds.

Issue price of the bond - the price at which the bonds are sold to their first owners. The issue price may be equal to, less than or greater than the face value. It depends on the type of bond and the terms of the issue.

Redemption price

▪ the price paid to bondholders at the end of the loan term. In most issues, the redemption price is equal to the par price, but it may differ from the par price.

exchange price

▪ the price at which bonds are sold on the secondary market. If a bond has a strictly defined nominal price, redemption price and issue price, the level of which is fixed when the loan is issued, then the exchange rate price undergoes significant changes during the life of the bond.

Bonds are issued as a means to raise capital to finance programs when shareholders seek to increase the volume of operations.

Author: Kuznetsova S.A.

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