Bonds (5/50)

an investor lends in return for the promise to have the loan repaid on a fixed date and

(usually) a series of interest payments

• Bond

• Stock

Advantages of Bonds except:

• a regular and certain flow of income

• fixed maturity date (but there are bonds which have no redemption date, and

  others which may be repaid on either of two dates or between two dates – some at the investor’s

  option and some at the issuer’s option)

•  the real value of the income flow is eroded by the effects of inflation (except in the case of

  index-linked bonds)

• relative security of capital for more highly rated bonds.

If interest rates increase, bond prices will increases.

• True

• False

There are more than 70 agencies throughout the world, and preferred agencies vary from country to

country. The three most prominent credit rating agencies are except:

• Standard & Poor’s (S&P)

• Moody’s

• Fitch Ratings

• Goody's

a money market instrument used to finance the government’s short-term

borrowing needs. They have maturities of less than a year and are typically issued with maturities of

28 days, 91 days and 182 days. They are zero coupon instruments that pay no interest and instead

are issued at a discount to their maturity value

• Treasury bills

• Treasury notes

• Treasury bonds

• Treasury inflation-protected securities

conventional government bonds that have a fixed coupon and redemption date.

They have maturity dates ranging from more than one year, to not more than ten years from their

issue date. They are commonly issued with maturities of two, five and ten years.

• Treasury bills

• Treasury notes

• Treasury bonds

• Treasury inflation-protected securities

again conventional government bonds, but with maturities of more than ten

years from their issue date, most commonly issued with maturities of 30 years

• Treasury bills

• Treasury notes

• Treasury bonds

• Treasury inflation-protected securities

these are index-linked bonds and are referred to as TIPS.

• Treasury bills

• Treasury notes

• Treasury bonds

• Treasury inflation-protected securities

When a company is seeking to raise new funds by way of a bond issue, it will often have to offer security to provide the investor with some guarantee for the repayment of the bond.

• Security

• Redemption

In some cases, a corporate bond will have a call provision, which gives the issuer the option to buy back all or part of the issue before maturity.

• Security

• Redemption