Bonds presantation

Bonds presantation

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  Welcome To The Presentation On Bonds Presented by: Hari krishna.D Venkata subhramanyam Naveen kumar.M
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  CONTENTS What isbond? Definition of bonds Meaning of bond Characteristics of bonds Features of bonds Types of bonds
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  BOND A longterm contract under which a borrower agrees to make payments of interest and principal on specific date, to the holders of the bond
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  Definition A writtenand signed promise to pay a certain sum of money on a certain date, or on fulfillment of a specified condition. All documented contracts and loan agreements are bonds.
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  Meaning A debtinvestment in which an investor loans money to an entity (corporate or governmental) that borrows the funds for a defined period of time at a fixed interest rate. Bonds are used by companies, municipalities, states and U.S. and foreign governments to finance a variety of projects and activities. Bonds are commonly referred to as fixed-income securities and are one of the three main asset classes, along with stocks and cash equivalents.
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  Characteristics of aBond Par Value the stated face value of a bond Coupon Interest Rate the fixed “rate of interest” which remains the same throughout the life of the bond Maturity Date Specified maturity date on which par value must be paid Call Option It gives the issuer the opportunity to repurchase the bonds prior to maturity
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  Features of aBond Principal Nominal, principal, par or face amount — the amount on which the issuer pays interest, and which, most commonly, has to be repaid at the end of the term Maturity The issuer has to repay the nominal amount on the maturity date. As long as all due payments have been made, the issuer has no further obligations to the bond holders after the maturity date. The length of time until the maturity date is often referred to as the term or tenor or maturity of a bond. Coupon The coupon is the interest rate that the issuer pays to the bond holders. Usually this rate is fixed throughout the life of the bond. Interest can be paid at different frequencies: generally semi-annual, i.e. every 6 months, or annual Yield The yield is the rate of return received from investing in the bond
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  Types of Bonds Floating Rate Bonds Zero Coupon Bonds Perpetual Bonds Convertible Bonds High-Yield Bonds Corporate Bonds: Government Bonds Inflation-indexed (or inflation-linked) Bonds Extendible and Retractable Bonds Municipal bonds
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  Zero Coupon Bonds The issue price of Zero Coupon Bonds is inversely related to their maturity period, i.e. longer the maturity period lesser would be the issue price and vice-versa. These types of bonds are also known as Deep Discount Bonds Floating Rate Bonds: Floating Rate Notes are bonds in which interest rate depends on the interest rate prevailing in the market. The interest rate paid to the bondholder at regular intervals comprises of the interest rate prevailing in the market and ‘spread’, which is a rate that is fixed when the prices of the bond are being fixed and it remains constant till the maturity period of the bond.
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  Perpetual Bonds: PerpetualBonds, which are also known as the name of Consol, are the bonds which have no maturity period and keep on paying interest to the investors regularly. The issuer of Perpetual Bonds is not required to redeem these bonds. They are generally treated as equity and not as loan / debt. Convertible Bonds: 1. The holder of a convertible bond has the option to convert the bond into equity (in the same value as of the bond) of the issuing firm (borrowing firm) on pre-specified terms. 2. Convertible bonds may be fully or partly convertible. For the part of the convertible bond which is redeemed, the investor receives equity shares and the non-converted part remains as a bond.
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  High-Yield Bonds: Highyield (non-investment grade) bonds are from issuers that are considered to be at greater risk of not paying interest and/or returning principal at maturity. As a result, the issuer will offer a higher yield than a similar bond of a higher credit rating and, typically, a higher coupon rate to entice investors to take on the added risk. Corporate Bonds: These are issued by large corporations and have higher yields because there is a higher risk of a company defaulting as compared to government bonds.
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  Government Bonds: Theseare the bonds issued by government in its own currency. They are usually referred to as risk-free bonds. Bonds issued by national governments in foreign currencies are referred to as sovereign bonds. Inflation-indexed (or inflation-linked) Bond: It provides protection against inflation, and is designed to cut out the inflation risk of an investment.
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  Extendible and RetractableBonds:  Extendible and Retractable bonds have no fixed maturity date.  While the maturity period of extendible bonds can be extended on the demand of the buyer of these bonds, the maturity period of retractable bond can be reduced and the principal amount returned to the buyer if he feels so. Treasury Bond –( T-Bond): A marketable, fixed-interest U.S. government debt security with a maturity of more than 10 years. Treasury bonds make interest payments semi-annually and the income that holders receive is only taxed at the federal level.
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  Municipal Bond: Adebt security issued by a state, municipality or county to finance its capital expenditures. Municipal bonds are exempt from federal taxes and from most state and local taxes, especially if you live in the state in which the bond is issued. Foreign Bond: A bond that is issued in a domestic market by a foreign entity, in the domestic market's currency. A foreign bond is most often issued by a foreign firm to raise capital in a domestic market that would be most interested in purchasing the firm's debt. For foreign firms doing a large amount of business in the domestic market, issuing foreign bonds is a common practice. Types of foreign bonds include bulldog bonds, matilda