CORPORATE BONDS

Coupon

Par value

Bond s Terminology

Interest payments

Maturity

CORPORATE BONDS
It is a bond that a corporation issues to raise money in order to expand its business. The term is usually applied to longer-term debt instruments, generally with a maturity date falling at least a year after their issue date.

INDENTURE
It is a contract between the issuer of a bond and its bondholders and sets the terms of the bond. it includes
coupon rate, the period until maturity, whether the bond comes with any special features like convertibility whether it is callable.

All bonds must have an indenture. Indentures are usually summarized in a bond's prospectus.

Risk-Return Trade-off in Bonds

Corporate bonds are considered higher risk than government bonds. As a result, interest rates are almost always higher and so as the risk Lower the interest rate, lower the risk bond will bear

Callable Bonds
Callable bonds are bonds that give the issuing corporation the right to repurchase its bonds by paying the bondholders the bonds face amount plus an additional amount. That additional amount is call premium which might be one year of additional interest.

Characteristics of Bonds

Bearer bonds Whoever physically holds the paper on which the bond is issued owns the instrument.

Registered Bonds Owner must registered with the firm to receive the interest payments

Restrictive Covenants Rules and regulations designed to protect bondholders interest.

Call Provision allows the original issuer to repurchase the bonds

Sinking Fund issuing corporation has to deposit money into an account that is restricted for the payment of the bonds maturity amount

Conversion allow the bondholder to exchange the bond for a specified number of shares.

Types of Bonds

1.Secured bonds