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One disadvantage for an issuer when issuing bonds is that they have to make periodic interest payments to bondholders, which can put a strain on cash flow. Additionally, they may have to pledge assets as collateral to secure the bonds, limiting their financial flexibility.

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1y ago

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What are continuously callable bonds and how do they differ from traditional callable bonds?

Continuously callable bonds are a type of bond that can be redeemed by the issuer at any time, rather than only on specific dates as with traditional callable bonds. This gives the issuer more flexibility but can be a disadvantage for investors as they may not receive the expected interest payments for the full term of the bond.


Why issue convertible bonds?

Generally, convertible bonds come at a lower cost to the issuer.


What does REGS mean in reference to bonds?

REGS is short for "registered bonds". These are bonds that are issued in the name of the bondholder, meaning the investor's ownership is recorded by the issuer. This allows the issuer to track and communicate with bondholders more easily than with bearer bonds.


What is revenue bonds?

The bond which are obligated to get paid their principal and interest from issuer or its project through the revenue collection are known as "Revenue Bonds". Usually, issuer issues bonds for certain "project" and he requires capital investment hence he issues revenue bonds and the issuer pays back the interest and principal of the bonds through the receipt of the project i.e; through the revenue earned by the project.


How often are callable bonds called by the issuer?

Callable bonds are typically called by the issuer when interest rates fall significantly below the bond's coupon rate, allowing the issuer to refinance at a lower cost. The frequency of callable bonds being called can vary depending on market conditions and the terms of the bond agreement.


Why are bonds considered a form of debt financing?

Bonds are considered a form of debt financing because they represent a loan agreement between the issuer (borrower) and the bondholder (lender). The issuer borrows money by selling bonds to investors and agrees to pay them periodic interest payments and repay the principal amount at maturity. This makes bonds a form of borrowing that creates a liability for the issuer.


What is the difference between callable and putable bonds?

Callable bonds give the issuer the right to buy back the bond before it matures, while putable bonds give the bondholder the right to sell the bond back to the issuer before it matures.


Why buys bonds and not stocks?

Bonds and stocks serve different purposes to the investor, and ideally you should buy both. Advantage of investment-grade bonds: the issuer is committed to paying you a stated amount of money on a stated date. The disadvantage is your return is limited to the agreed-on amount. Advantage of stocks: potentially unlimited return on your investment. The disadvantage is there are no guaranteed returns with stocks; you could potentially lose everything you invested in them. Speculative-grade bonds, or "junk bonds," have a risk/reward system more like stocks than investment-grade bonds.


What is a revenue bond?

The bond which are obligated to get paid their principal and interest from issuer or its project through the revenue collection are known as "Revenue Bonds". Usually, issuer issues bonds for certain "project" and he requires capital investment hence he issues revenue bonds and the issuer pays back the interest and principal of the bonds through the receipt of the project i.e; through the revenue earned by the project.


Is an issuer of a bond a lender or borrower?

An issuer of a bond is a borrower. When an entity, such as a corporation or government, issues bonds, it is essentially borrowing money from investors who purchase the bonds. In return for their investment, the issuer agrees to pay back the principal amount at maturity and make periodic interest payments. Thus, the issuer incurs debt while investors become creditors.


1 Bonds that have an option exercisable by the issuer to retire them at a stated dollar amount prior to maturity are know as?

callable bonds


What happens when a yield to maturity is less than the yield to call?

The issuer will call the bonds and issue new bonds to the maturity date.