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There is often
confusion between the yield and the coupon rate of a bond. While the coupon
rate is fixed at issue, and does not change till maturity, the yield is the
discount rate or interest rate that an investor wants from investing in a
bond. Price bonds are quoted in relation to their yields. As the required
yield increases, the price of the bond decreases. The reverse is also true.
Remarks: Corporate Bonds or loan stocks are long term
fixed interest income debt securities income debt securities issued by
companies. They usually have a lifespan of five years and are redeemable at
par value on maturity. Bond and loan stock issues vary in many ways and have
many optional features. Some are secured by collateral, others are backed by
guarantees; yet others have no collateral support and are only unsecured
promises to pay. In addition, the bond indenture may provide that the bond
may be redeemable at a specified price.
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