the capital and bond market (Corporate bonds (Unsecured Bonds ( will have…
the capital and bond market
Capital Market Participants
The federal government issues long-term notes to fund the
State and municipal governments issue long-term notes and bonds to finance capital projects
Corporations issue both bonds and stock
The largest purchasers of capital market securities are households
Capital Market Trading
the primary market
Investment funds, corporations, and individual investors can all purchase securities
sell securities for the very first time
the secondary market
The capital markets have well-developed secondary markets
It is important
because most investors plan to sell long-term bonds before they reach maturity
most capital market transactions, measured by
volume, occur in organized exchanges
govern trading to ensure the efficient and legal operation of the exchange
TYPES OF BONDS
belong to the person who holds them
the risk of
loosing the certificate it offers the highest degree of anonymity
Coupons are detachable from the bond certificate by a perforation,
and are presented to the paying agent of the issuer, usually a commercial bank, for
The book entry method,
where no certificate is issued and ownership is recorded in a ledger
are free of default risk
to finance the national debt.
have very low interest rates
proceeds-to finance public interest projects
General obligation bonds do not have specific assets
Revenue bonds are backed by the cash flow of a particular
are not default-free
Bonds are securities that represent a debt owed by the issuer to the investor.
The coupon rate is the rate of interest that the issuer
The date when the loan
becomes due is called the maturity date of the bond
.Long-term bonds traded in the capital market include long-term government notes
and bonds, municipal bonds, and corporate bonds.
to finance a specific project
will have a lower interest rate.
Equipment trust certificates
secured by tangible non-real-estate property
low interes trates
are ones with collateral attached.
will have a higher
interest rate than secured bonds
are backed only
by the general creditworthiness of the issuer.
have a contract that spells out the terms of the bond and the
The interest rate will change
over time as market rates change.
they were usually unsecured.