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investment chapter 10.2 (types of bonds (Zero-Coupon Bonds (Do not pay…
investment chapter 10.2
Bond Ratings
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Junk bond ratings are received by companies making payments, but default risk is high
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types of bonds
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Treasury Bonds
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Sold in $1,000 denominations
Types of Treasury Bonds
Treasury notes: maturities of 2, 3, 5, 7, and 10 years
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municipal bonds
Issued by states, counties, cities and any other political subdivision
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Zero-Coupon Bonds
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Interest must be reported as it is accrued for tax purposes, even though no interest is actually received.
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securities
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Asset-Backed Securities
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Short maturities, typically 3 to 5 years
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Convertible Securities
Fixed-income security that allows holder to convert the security into a specified number of shares of the issuing company’s common stock
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“Equity kicker”
another name for the conversion feature that allows holder to convert the security into a specified number of shares of common stock
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Conversion price
the stated price per share at which common stock will be delivered to the investor in exchange for a convertible issue