Question

its from introduction to finance 1/2 chapters mpod can you help me

To day Bonds- types The fed Premiums on bonds

they want a

classification of bond (types)

quantitative easing

the fed

premium on bonds

its FNB 100 chapter 2 reviewing financial statements

Answer 1

Answer:

Bonds- It is a fixed income security that represents a loan, made by an investor to the borrower. Owner of the bond is called Creditor. This is one of the financial instruments, it pays interest in return.

Types of Bonds- Are as following:

Treasury bonds- Bonds and notes, issued by the Government, is called treasury bonds. These are the most secured bonds but they pay lower rate of interest. Treasury bills are for short term (1 year), treasury bonds are for long term (from 10 to 30 years).

Risk- They are the risk free bonds

Municipal bonds- These are issued by local and state government to raise the funds to build schools, colleges, parks, highways etc. Sometimes, these bonds are exempt from federal income tax. There are two types of municipal bonds, General obligation that are secured by the full faith and credit of the issuer and supported by the issuer's taxing power. Revenue bonds are repaid using revenue generated by the individual project the bond

Risk- They have moderate risk as the local Government may go bankrupt.

Corporate bonds- These bonds are issued by the companies to raise the funds for their operations of capital budgeting. They provide very high return. Companies also issue convertible bonds that can be later converted into shares.

Risk- Risk is higher in these bonds.

Zero coupon bonds- As the name suggests, these bonds provide no coupon payment, means no interest but they are issued at deep discount, the bond is redeemed at the full value or face value at the time of maturity.

Risk- Are subject to inflation, interest rate and credit risk.

Junk bonds- These bonds provide higher yield but have higher risk. These bonds generally have lower credit ratings. These are issued by companies who seek instant funding.

Risk- Risk is the highest.