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Bond Investments
Term | Definition |
---|---|
Bond | "A fixed income investment in which an investor loans money to an entity (typically corporate or government) which borrows the funds at a defined period of time at a variable or fixed interest rate." |
Callable Bond | " A bond that can be redeemed by the issuer prior to its maturity." ; aka redeemable bond; eg, if a bank's interest rates have gone down since issuing a bond, they will "call" the holder and reestablish a new interest rate. |
Corporate Bond | Loan given from a corporation to an investor(usually); Collateral can sometimes be the company's assets, and assurance(kinda like credit scores) is a company's possible future income(paid with future transactions/business money). |
(Federal) Agency Bond | Bonds issued by federal agencies(or, in some cases, by the US Treasury), to investors; used for things such as student loans, mortgage funds, and more. |
Junk Bond | High-yield, speculative, risky bonds; because of this, they offer higher interest rates. Issued by the government or corporations; have a maturity date, principal amount, and higher 'coupon'(interest; looks more attractive); used to attract investors. |
Municipal Bond | Issued by the state; used for capital expenditures(highways, schools, etc). Exempt from taxes, so they are attractive to those in the high income tax brackets. |
Treasury Bond | Aka T-Bond; fixed interest, 10+ year maturity, Semi-annual payments, and exempt from all but federal taxes. Issued by the US government with low risk. |
Debenture | Not secured by physical assets/collateral; only backed by worth/'credit' of the issuer. Used to secure capitol(wealth in assets/money). |
Face Value | The amount of money being loaned; the price of a bond when it's first issued. |
Source: | www.investopedia.com |