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What is a bond rating?
A bond issuer's probability of defaulting
What does a bond rating measure?
The likelihood that the issuer will default on payment
When is a bond par value generally repaid?
A bond is a type of a debt security, the approved issuer owes the holders a debt. The repayment period is often an agreement between the issuer and the holder.
What is the payment made when a bond matures?
The payment made when a bond matures is the face value of the bond, which is the original amount borrowed by the issuer.
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.
What is the difference between a callable bond and a retractable bond?
A callable bond is where the issuer has the ability to redeem the bond prior to maturity. A callable bond is where the bond hold has the ability to force the issuer to redeem the bond before maturity. Hope this helps.
What is the major function of a Bond in commerce?
A bond is an instrument of indebtedness of the bond issuer to the holders. The issuer owes the holders a debt and pays them interest.
What is a bond rating?
A bond issuer's probability of defaulting
What is bond ratings?
A bond issuer's probability of defaulting
What is the difference between a put option and a mandatory tender on a municipal bond?
A put option is at the discretion of the holder(owner) of the bond to put (sell) the bond back to the issuer for redemption. A mandatory tender is at the discretion of the issuer of the bond to require that the holder sell the bond back to the issuer (usually at par).
When you buy a bond the issuer will owe you the full amount of the bond regardless of when you choose to cash it in?
When you buy a bond, the issuer agrees to repay you the full face value of the bond when it matures. If you choose to sell the bond before maturity, the issuer is not involved in that transaction - you would sell it on the secondary market to another investor.
What is the theory behind requiring bond issuers to charge bond discounts to interest expense when the discount is amortized?
When a bond matures the issuer has to pay the investor the full face value of the bond. The bond will also have a stated interest rate. If an investor will only accept a rate of interest which is higher than the stated interest rate, the issuer will likely sell the bond for less than the present value of the face value of the bond. For example, If a $100,000 bond is issued with a $4,000 discount to meet the buyers desired return, the issuer will have to pay the investor the $96,000 ($100,000-$96,000) the issuer received plus the $4,000 discount upon maturity. Since the issuer has to pay out that $4,000, upon maturity, to secure $96,000 the $4,000 discount is recognized by the issuer as interest expense (over the life of the bond).
What does a bond rating measure?
The likelihood that the issuer will default on payment
When is a bond par value generally repaid?
A bond is a type of a debt security, the approved issuer owes the holders a debt. The repayment period is often an agreement between the issuer and the holder.
What is bond serving?
Bond serving typically refers to the process of a bond issuer making regular interest and principal payments to bondholders as outlined in the bond agreement. This allows investors to receive their expected returns on the bond investment over time. Bond serving is crucial for maintaining trust between the issuer and investors in the bond market.
What is the payment made when a bond matures?
The payment made when a bond matures is the face value of the bond, which is the original amount borrowed by the issuer.
How is a Stock different from a Bond?
A Bond is like a fixed deposit. It is like a loan agreement between the bond issuer and the buyer. The person who owns a bond only has a debt obligation from the bond issuer. On the other hand Stock means ownership. Every stock owner of a company practically owns a portion of that company.
