A straight bond is a bond that pays periodic interest payments and repays the face value of the bond at maturity. Straight bonds are the simplest type of bond and are the most common type of bond issued by corporations. What are the 5 types of bonds? 1. Treasury bonds: These are bonds issued by the U.S. government and are considered to be the safest type of bond. They are backed by the full faith and credit of the U.S. government and are typically used to finance government spending.
2. Corporate bonds: These are bonds issued by corporations and are typically used to finance capital expenditures. Corporate bonds are typically more risky than treasury bonds, but offer higher interest rates.
3. Municipal bonds: These are bonds issued by state and local governments and are typically used to finance infrastructure projects. Municipal bonds are typically exempt from federal taxes, making them attractive to investors in high tax brackets.
4. Mortgage-backed securities: These are bonds backed by a pool of mortgages and are typically used to finance home buying. Mortgage-backed securities are typically more risky than treasury bonds, but offer higher interest rates.
5. Junk bonds: These are bonds that are considered to be high risk, high yield. Junk bonds are typically issued by corporations that are in financial distress.
What does it mean when a company calls a bond?
A company may "call" a bond when:
-The company has the right to do so as specified in the bond's terms and conditions
-The call is made at or before the call date
-The call price is equal to or greater than the par value
When a company calls a bond, it pays the bondholder the par value of the bond plus any accrued interest. The company then retires the bond. What are plain vanilla bonds? Plain vanilla bonds are the simplest type of bond, and are typically issued by governments or large corporations. They have a fixed interest rate and a fixed maturity date, and are not subject to any special provisions or conditions. What is the other name for a bonds interest rate? The other name for bonds interest rate is coupon rate. What does floor mean in finance? The floor in finance refers to the minimum interest rate that will be paid on a variable-rate debt instrument, such as a bond. The interest rate on the debt instrument will fluctuate with the market interest rate, but will never go below the floor. For example, if a bond has a floor of 3%, then even if the market interest rate falls to 0%, the bondholder will still receive 3% interest.