What are Bonds? Special Article for Banking Exam
Gentlemen prefer bonds,
punned Andrew Mellon, an American tycoon. A bond is
an interest-bearing security issued by governments, companies and some
other organizations.
Bonds are an alternative way for the issuer to raise capital to selling shares or taking out a bank-loan. Like shares in listed companies, once they have been issued bonds may be traded on the open market.
A bond's yield is the interest rate (or coupon) paid on the bond divided by the bond's market price. Bonds are regarded as a lower risk investment. government bonds, in particular, are highly unlikely to miss their promised payments.
Corporate bonds issued by blue-chip "investment grade" companies are also unlikely to default; this might not be the case with high-yield "junk" bonds issued by firms with less healthy financials. (See yield curve.)
Bonds are an alternative way for the issuer to raise capital to selling shares or taking out a bank-loan. Like shares in listed companies, once they have been issued bonds may be traded on the open market.
A bond's yield is the interest rate (or coupon) paid on the bond divided by the bond's market price. Bonds are regarded as a lower risk investment. government bonds, in particular, are highly unlikely to miss their promised payments.
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| What are Bonds? Special Article for Banking Exam |
Corporate bonds issued by blue-chip "investment grade" companies are also unlikely to default; this might not be the case with high-yield "junk" bonds issued by firms with less healthy financials. (See yield curve.)
