Bonds and The Bond Market Given today's uncertain economy, many people are taking time to examine various options for their financial future. Different types of investments are investigated and bonds are one of the more popular choices considered. Many of the same people who talk about investing in bonds, however, do not fully understand them nor where they place in the economy. Many individuals believe that they should simply buy a bond and wait until it matures before cashing it in. These people fail to realize that they may be losing a lot of money due to the fluctuation of bond prices. At some point it may be more profitable for them to sell their bond than to keep it until the payment date is reached. There are many people who do not understand what bonds really are. A bond is an agreement between two separate entities. One of these bodies gives, to the other, use of their money for a period of time and, in return, may receive a "bond". The bond issuer agrees to a fixed rate of return which he will pay the supporting person or business. This fixed rate of return is an amount, in percentages, which is paid at regular intervals until some future specified time ( the "maturity date"). Upon reaching the maturity date, one's original investment is returned to them. As previously mentioned, bonds are one of the more popular types of financial investment in today's economy. There are many reasons why people invest in bonds. For example, if one chooses a stable and profitable bond, it will provide a steady source of income through interest payments during the lifetime of the bond. As well, the risk when investing in a bond is considerably less than for most other forms of investment. The bond does not, for instance, experience the volatility of a stock on the stock market, like many other forms of investment do. Also, in instances where the issuer fails to pay the principal amount back to the bond holder, legal recourse is available. Furthermore, in cases of bankruptcy within large corporations with stock holders, bond holders take priority and are ... ... middle of paper ... ...onsequently the prices of previously purchased bonds decrease. If you are able to hold onto your bond until the maturity date is reached, temporary changes in interest rates will not affect your financial investment; however, if you need to sell the bond before the marked maturity date, you might have to accept LESS than what you paid for it. This volatility can work to your advantage too, because it is possible that your bond could be worth more at the time you decide to sell. This is why it is important to keep up to date on bond prices. You may be able to make money by simply selling your bond before it's maturity date. In conclusion, I would suggest that bonds are a wise venue for anybody wanting to financially invest in different corporations or governments. I would caution, however that when selecting a bond, one should seek the guidance of an experienced investor. By choosing a bond that is right for you and your lifestyle, you have the potential of increasing your profits greatly and going home wealthier and happier.
The high yield bond is a bond that features higher returns but with a lower credit rating than typical investment-grade bonds. These bonds can also be referred to as ‘junk bonds’ that are rated as below investment grade by organizations such as Moody’s and Standard and Poor’s. [Appendix #1] Generally, companies that issue high yield bonds may receive their rating due to a few characteristics, such as being less established than typical household brands, showing weak financial performance or they may have suffered a financial setback at some point in their corporate history. Although, high yield bonds may seem to have a relatively negative reputation among investors they possess many attractive advantages which include: diversifying portfolios, greater yields, lower volatility thus makings for a good long-term investment and the fact that bondholders have priority of recovering their money over equity security holders in the case of bankruptcy. These bonds are accessible to investors either as individual issues or through the means of high-yield mutual fund investments. On the other hand, there are certainly risks involved when investing in high yield bonds, such as credit risk where there is the possibility that the issuer defaults on the principal or interest payments over the course of the term and investment in these bonds ultimately depends on how informed the investor is and the amount of risk the investor is willing to tolerate. Similar to other types of securities there is always the threat of economic downturn and risks occurring when investing in international markets, such as political and exchange rate risks. In contrast, high yield bonds are able to mitigate interest rate risks better, and are less vulnerable to drast...
Stein, J. (1992). Convertible Bonds As Backdoor Equity Financing. Retrieved on June 12, 2006, from the World Wide Web at: http://www.financeprofessor.com/summaries/Stein1992ConvBond%20paper.htm.
...at choose long-term securities. This is due to their business nature that require long-term securities such as companies that involves in project that have long development period. Hence, the yield curve is generally upward sloping.
company, the benefit of bringing in a 35% net income outweighs the cost of a 2% loss of interest
In the health care industry, organizations that decide to issue bonds generally go through the following steps:
William Sharpe, Gordon J. Alexander, Jeffrey W Bailey. Investments. Prentice Hall; 6 edition, October 20, 1998
Another benefit of zero-coupon bonds is its possible tax advantages. Interest on municipal zero-coupon bonds is exempt from federal income taxes and, in many cases, free from state and local taxes. Because municipal zeros offer the benefit of compound interest free from federal taxes, they provide returns that are often much higher on a net basis than comparable taxable securities. ‘Zeros purchased prior to April 1993 and held to maturity are not subject to capital gains tax unless they are purchased at a price lower than the compound accreted value (CAV). The sale or excha...
One might know that time is one of the most valuable assets in our lives. In the financial world the value of money is linked to time, primarily because investors expect progressive returns on their cash over periods of time, and they always compare the return from certain investments with the going or average returns in the market. Inflation on other hand erodes the purchasing power of money causing future value of one dollar to be less than the present value of a dollar. This paper will examine time value of money and the applications that determine successes or failures. An examination of the different vehicles that can be used to generate financial security for corporations and individuals will be provided. After defining the applications that generalize time value of money, an explanation will be offered regarding the components of interest rates by expanding on the concept that interest rate equates the future value of money with present value.
At the beginning of the income period, to ensure adequate money holding for consumption transactions, 1/K of income is retained as money. The remaining balance (K-1/K ∙Y), is used to purchase interest bearing bonds, producing an average money holding of ( Y/2∙1/K). A further factor in the model is that the cost of transacting money out of bonds and vice versa is bK, therefore the less time the average cash balance is held, the more frequently bonds are sold and the higher overall transaction costs; the less money balances that are held, the more brokerage costs will be.
Alfred Lord Tennyson was born August 6, 1809, at Somersby, Lincolnshire. He was the fourth of twelve children. As a boy he led a very miserable and unhappy life. In 1828 Tennyson entered Trinity college, Cambridge. The most important part of his experience there was his friendship with Arthur Henry Hallam, who was the son of a well known historian. Hallam encouraged and inspired Tennyson to write. Hallam died in 1833. Tennyson published poems in 1842 which proved to be a great success and secured his position as the foremost Victorian Poet. The year 1850 was important to Tennyson for two reasons: his marriage to Emily Sellwood and the publication of "In Memoriam" , his great elegy to Arthur Hallam. "In Memoriam’ was merely a verification of some of the books that Tennyson had been reading" (Wiley 160). These books included Lyell and Darwin. Many of the lines in his poem show an interesting compromise between religious attitude and what is quite a different belief, the belief in human perfectibility. "In Memoriam" can be justly called a religious poem. However it is not religious because of its faith, but because of the quality of its doubt. Its Faith is a poor thing, but its doubt is a very intense experience.
Alfred, Lord Tennyson was an interesting man that transferred his emotions into his works of literature. He was a sensitive person and using those emotions into his works of art helped him survive into old life. The biggest influence in Lord Tennyson’s life was his best friend, Arthur Henry Hallam. Hallam suddenly died and it left a tragic hole in his life. However, having his friend pass away proved better for Tennyson’s life as it transferred into a beneficial job for him. Tennyson’s short poems considered questions of death, faith, and immortality (Jobin). Three moments in Alfred, Lord Tennyson’s life is his rough childhood, loss of loved ones, and national honor.
As a child Percy was carefree and independent going wherever he pleased and exploring his surroundings. He learned to fish and hunt in the meadows encompassing his home, he often surveyed the rivers and fields with his cousin and close friend Thomas Medwin. “…insanity hung as by a hair suspended over the head of Shelley” (“Percy Bysshe Shelley”). At the age ...
There are two different ways in which money can be invested. The first way that money can be invested is through stocks. Stocks are defined as a mean by which money can be invested. The two different types of stocks are; common, and preferred. This type of investing involves the individual actually putting money toward a company that they want to invest in, some of these include companies like; Wal-Mart, among many others. The other way that money can be invested is through bonds. There are many different types of bonds that can be invested in today. Some of these include; personal bonds, as well as many
The design of clothes for soldiers and fighters in both the gladiator and Troy was done with great similarities. Both the Gladiator and Troy had fighters dressed in short length attires, perhaps to make it easier for them to move freely across different terrains. Both were armed with metallic shield to help fend off from bruising attacks, much of which was being fought using sword.
Bonds have a number of characteristics that differentiate one issue from another. We are going to define and describe a number of characteristics in detail below.