Types of Bonds

Question 1

What are the mos common types of Bonds ?

Answer 1

1) Fixed rate bonds
2) Floating rate bonds
3) Capital Indexed bonds
4) Inflation indexed bonds

Question 2

What are fixed rate bonds ?

Answer 2

These are bonds on which the coupon rate is fixed for the entire life of the bond

Question 3

What are floating rate bonds ?

Answer 3

These are securities that do not have a fixed coupon rate. It has a variable coupon rate which is reset at pre-announced intervals

Question 4

What are Capital indexed bonds ?

Answer 4

These are bonds in which the principal is linked to an accepted index of inflation.

This is to protect the principal amount of investors from Inflation

Question 5

What are Inflation indexed bonds ?

Answer 5

In these bonds both coupon flows and principal amounts are protected against inflation