Some Different Types of Bonds

Some Different Types of Bonds - o Holder can redeem the...

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Chapter 7.4: Some Different Types of Bonds U.S government is the biggest borrower in the world o When they want to borrow money they issue treasury notes Treasuries have no default risk and are exempt from state income taxes Municipal notes or bonds – state and local government debt issuance o Exempt from federal income taxes Because of the tax break munis get yields are lower than those of taxable bonds Zero coupon bond – a bond that makes no coupon payments so it is initially priced at a huge discount With floating rate bonds the coupon payments are adjustable o The value of the floating bond depends on exactly how the coupon payment adjustments are defined Features of Floaters:
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Unformatted text preview: o Holder can redeem the note at par on the coupon payment date after some specified amount of time (put provision) o Coupon rate has a floor and a ceiling (collar) TIPS Treasury inflation protected securities Warrant gives the buyer of a bond the right to purchase shares of the companies stock at a fixed price o Often issued at very low coupon rate Income bonds coupon payments depend on company income Convertible bond can be swapped for a fixed number of shares of stock anytime before maturity at the holders option Put bond allows the holder to force the issuer to buy back the bond at a stated price o Reverse of the call provision...
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This note was uploaded on 12/06/2011 for the course FIN 3134 taught by Professor Ddklock during the Fall '08 term at Virginia Tech.

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