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Bonds and Treasuries
A note whereby the investor loans a corporation or government money at a set interest rate over a predetermined time period.
1,619 Questions
Why would investors buy a junk bond?
Firsly investors buy junk bond because they are cheaper.Although they have higher risk of default they also have higher return.
Why are stocks better than bonds?
They aren't. Well not necessarily.
The spurious argument used by academics is that in 'the long run' stocks pay higher returns than bonds. But then tell that to shareholders of Lehman who now have $0, or even Citibank who had shares worth $60 in 2007 and are worth $3 in 2009.
Like any investment, timing is the answer. The 60 year old who had 100% of his/her money in stocks and has to retire in 2009 is in deep trouble. The 60 year old who was in US Treasuries (government bonds) is safe, or better, has actually made money in this crisis of 2007/20??.
Yields on long term government bonds were higher in 1977 - 1981 than they were in 1976 and the price decline from higher interest rates was greater than the coupon income.
Why does buying a corporate bond involve less risk than buying stock in the same corporation?
When a company faces near bankruptcy and needs to liquidate its assets, the first claim will be given to the creditors before the stockholders. The bond represents the debt of a company. Hence, it is the company's legal obligation to settle it. While the stockholders will just share the gains and as well as the losses of the company.
Which Oregon Municipal Bonds are available?
I believe this is the best and most updated list of Oregon Municipal Bonds that are available.
http://investment-income.net/rates/municipal-bonds-rate-page
What are pre-refunded municipal bonds?
When a municipality has sufficient funds but cannot call the bond before the maturity, it can buy Treasuries, place them in an escrow account, and use the interest proceeds to pay the muni interest. Such process makes the pre-res almost as safe as US Treasuries, but tax-free. At the maturity of the munis a municipality will sell Treasuries and buy back the muni bonds with the proceeds.
Toronto Dominion Bank
Ticker symbol TD, traded on the New York Stock Exchange.
How is the Fed involved in U.S. savings bonds?
Regardless of how the bonds are purchased--for example, through an employer savings plan or a bank--it is the Fed that processes the applications and sends the bonds.
What is the risk of a municipal bond?
---- Depending on the number of days to call (or maturity), coupon rate, and price paid, any bond will have a different yield to worst (the lower of the yield to maturity or yield to call). If you decide to hold the bond to the potential call date or maturity date, the only risk assumed will be the risk of the issuer's default or coupon reset. This risk is qualified by rating agencies, such as Standard & Poor's, with bond ratings like AAA or BB, etc. AAA municipal bonds are commonly insured against the issuer's default. If you want to sell a municipal bond before the maturity or call date, you additionally bear the market risk of price fluctuations. These fluctuations will be mainly due to expectations about future interest rate changes in the market (e.g., Fed Fund Rate by FOMC).
muni yield must equal 10% to be equal to the tax shield 6 percent of the treasury yield. 100(muni yield) = 100(t-yield)/(1-(marginal tax)) 100x = 100x .06/(1-.40) 100x = 100x .06/0.6 divide both side by 100 x = .06/0.6 x= 0.10 muni rate equals 10%
What are the characteristics of debentures?
1. It is an instrument in writing. An oral promise in acknowledgement of a debt is not a debenture.
2. It is an acknowledgement of the indebtedness of the company to its holder for the amount stated in it.
3. It is usually under the seal of the company but it is not necessary. A certificate signed by two directors of a company and without bearing the company's seal is a valid debenture.
4. It is one of a series of like debentures. But a single debenture may be issued to one man.
5. It provides for the payment fixed sum with interest of a specified rate by a specified time. But this is not essential because a company may issue perpetual debentures. Section 120 of the companies' act 1956 expressly provides for the issue of perpetual or irredeemable debentures w3hich are made payable only in the event of a winding up or some serious default with the company.
6. It is generally secured by a charge, fixed or floating on any part of the company's property or undertaking. But this is, however, not an essential condition because section 2(12) provides that the debentures may or may not constitute a charge on the assets of the company.
From
Rohit Mathur Jaipur
A debenture is a debt security, like a bond is, but unlike a bond a debenture is unsecured. However, the two terms are basically interchangeable--a lot of people call bonds debentures and debentures bonds.
What do you get instead of a bond certificate when you buy a bond?
Before the possibility of paperless transactions, bond certificates were issued, but now transactions tend to be book entries only.
After redemption of debentures, debenture redemption reserve is to be transferred to general reserve.
What is the Current Rate of Return on Government Bonds?
Enclosed is a list of current rates on Government bonds. http://investment-income.net/rates/government-bonds-rate-page
A debenture is an unsecured bond that's issued either by a governmental or civil corporation and backed only by the credit standing or integrity of the issuer, not collateral. It is documented by an indenture, which is an agreement.
Where does the interest on a 4 year zero coupon go?
It goes to the investor who buys the bond.
A zero coupon bond is a bond in which, the investor need not pay any premium (coupon) above the face value of the bond while purchasing it.
Let us say a company issues a $10,000 bond at a discount of 10% with zero coupon, it is enough if the investor pays $9000 to buy the bond. At the time of maturity he would get back $10,000. This 10% discount can be compared to the interest earned on the investment for the investor.
How safe is AAA corporate bond?
Very safe, the biggest risk is a lower credit rating.
Those were my thought until Enron. Enron went from AAA to worthless very quickly. Fortunately, we did not own Enron paper.
For a while my kids received savings bonds and I didn't know their SS# so it was issued in their name and the SS# was mine so when we cash them in I will be paying the taxes and they will get the money. I don't know the legal answer and our bonds are easy since it is my child. But that might help. * It belongs to the person who is named. It is not an unusual occurrance.
What do you mean by P1 rating in bonds and debentures?
P1" is the highest short-term rating category for Moody's Investor Service. P1 rating are considered to be of high credit quality
What type of bond is sold below face value?
Many types of bonds may trade below face value. The reason for this is not based on the type of bond per se, but rather the conditions present in the marketplace. If a bond's coupon rate (the rate it pays its investors on a periodic basis) is below market interest rates for a bond of similar duration, the bond will trade at a discount to par (face value) since investors will have to be compensated in capital gains for what they will be missing out on yield if accepting the bond's coupon as opposed to market interest rates.
(Bond prices and interest rates move opposite of one another. As market interest rates rise, the value of already issued bonds fall - sometimes below par value.)
Yes. For a NYC resident, municipal bond interest is exempt from all three possible income taxes.
Difference between debenture and preference share?
Preference shares are equity form of capital while debentures are debt form of capital both type of capital has preference to be paid before the normal share capital holders in case of liquidation but interest paid on debentures is tax deductable which means that by paying interest company can save tax as interest reduces the net income of company while preference share holders receive interest after tax deducted net profit.
