CHAPTER 7 - Types of Bonds Treasury bonds long-term US Govt...

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Types of Bonds Treasury bonds – long-term US Gov’t Municipal bonds – state and local gov’ts Foreign bonds – issued by foreign government or corporation in foreign country Corporate bonds – marketable long-term debt issued by corporations
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Bonds and Valuation Bond Characteristics Par Value Coupon Rate Maturity These characteristics define the bonds cash flows
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Other characteristics Call provision Sinking fund provision Convertible bonds Bonds with warrants Puttable bonds Income bonds Indexed bonds Bond Indenture
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Other Characteristics Bond holders are creditors – they have no voting rights but do have priority in the payment of income and in liquidation The interest paid by the company is a tax deductible expense.
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Types of bonds Mortgage bonds (first and second) Debenture Subordinated debt
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Valuation The value of any asset is the present value of it’s future cash flows discounted at your required rate of return
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CHAPTER 7 - Types of Bonds Treasury bonds long-term US Govt...

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