Bonds
1. General information and different types of bonds
1.1. General information
Bonds summarize all securities which guarantee interest payments and repayment of the principal value. These interest-bearing securities are launched by different issuers, e.g. states, industrial firms or banks, throughout the world.
The majority of these securities are quoted on the stock exchange.
Bonds consist of a bond certificate and a coupon sheet. The certificate embodies the creditor position and the coupon sheet consists of single coupons (interest warrants) and the talon.
There are a lot of different types of bonds. In the next section I will explain how investors can distinguish the bonds.
1.2 Classification
According to Grill&Perczynski (1999, p.209, p.211, p.226) bonds can be organized at the following criteria:
Issuer: public authority, banks, industrial companies
Interest charges: fixed, variable, non-interest-bearing
Run time: short term (until 4 years), medium-term (4-8 years), long term (from 8 years)
Repayment: total due (principal value will be paid back at maturity) sinking-fund bonds (are paid back in partial amounts), eternal loans (never paid back)
Stock exchange: fungible or not
Headquarter: national or international
Currency: e.g. $ or ?
Special rights: additional rights with which the loan is equipped, e.g. convertible bonds
In this paper there are only analyzed four bonds, because they are the most common ones:
? Straight Bonds
? Zero Bonds
? Floating Rate Notes
? Convertible Bonds
1.2.1 Straight Bonds
Straight bonds are loan
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