F11-bond market Flashcards
purpose of bond market
long term investment
reduce risk that interest rate will rise before debt is paid off
participants
federal and local governments
corporations
Where can you trade bonds?
-primary market new stock or bond IPO=initial public offering -secondary market organized exchanges=rules govern trading over-the counter exchanges=directly between two parties
types of bonds
-treasury notes and bonds low interest cause of low default risk -municipal bonds finance public interest no tax, lower interest -corporate bonds usually seminannual interest callable=can be redeemed after a time
definition bond
debt owned by issuer to investor
specified amount at given date
often periodic interest
asset can be claimed if repayment terms are not met
STRIPS
zero-coupon securities
agency bonds
to raise funds deemed to be in national interest
study loan etc
low risk
general obligation bonds
high promised repay but not specified revenue
revenue bonds
cash flow of revenue-generating project
not default free
secured bonds
bonds with collateral attached
unsecure bonds
backed only by creditworthiness
financial guarantees
ensures lender to be paid principal and interest
restrictive covenants
restric merger agreement, limit dividend, limit additional debt
current yield
yearly coupon/current price of security
