- Certificate of indebtedness with
fixed interest rate and maturity
date - Long-term investment, in general
Bonds
Written agreement on bond issues
between the issuing party and the
bondholder
(BOND) INDENTURE
Classifications of Bonds As to issuing party
- Government bonds
- Commercial bonds
is a debt security issued by a government/public to support spending and obligations
Government bonds
are debt securities issued by a private corporation in order to raise money to grow the business, pay bills, make capital improvements, make acquisitions, and for other business needs.
Commercial bonds
Classifications of Bonds As to security
- Mortgage bonds
- Equipment trust bonds
- Collateral trust bonds
- Debenture bond
is a bond backed by real estate holdings or real property.
Mortgage bonds
it refers to a debt instrument that allows a company to take possession of and enjoy the use of an asset while paying for it over time.
Equipment Trust bonds
is a type of secured bond, in which a corporation deposits stocks, bonds, or other securities with a trustee so as to back its bonds.
Collateral Trust bonds
- is a type of bond or other debt instrument that is unsecured by collateral.
- type of debt instrument that is not backed by any collateral and usually has a term greater than 10 years
Debenture bonds
Classification of Bonds as to transferability
- Bearer bonds
- Coupon bonds
- Registered bonds
-> Registered as to principal only
-> Registered as to both principal & interest
is a fixed-income security that is owned by the holder, or bearer, rather than by a registered owner.
Bearer Bonds
is a bond that is essentially anonymous, with no name on the bond or sale record. The bond represents semi-annual interest payments.
Coupon Bonds
It has its owner’s name and contact information recorded with the issuing entity, ensuring coupon payments are correctly distributed.
Registered Bonds
Classification of Bonds as to Other classifications
- Zero coupon bonds
- Junk bonds
is an investment in debt that does not pay interest but instead trades at a deep discount.
Zero Coupon Bonds
- is debt that has been given a low credit rating by a ratings agency, below investment grade.
- that carry a higher risk of default than most bonds
Junk Bonds
Factors to consider in Investing in
Credit Securities
- Interest rate
- Date of maturity or call
- Value of security
- Yield on the security
- Credit rating of the issuing party
- Credit rating of the trustee (if any)
- Credit rating of the underwriter (if any)
