What is a bond: highlights

So, what is a bond? In the business environment, this concept is covered by issuing debt securities, the main feature of which is the obligation of the person who issued it, at a certain point to pay its holder the amount indicated on it and interest (for coupon documents). Unlike stocks, the return on them is fixed. The issuer of the bond is called the issuer. In its capacity can act organizations, administrations of executive authorities of different levels, foreign companies and entire countries

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The bonds can be issued ondifferent terms - from one year to several decades. The one who possesses it is called the holder of this document. In contrast to a conventional loan, the transfer of rights to claim such a debt does not require a large clearance procedure. Purchase of bonds and their sale to maturity can be made repeatedly. If we compare with other equity securities, we can distinguish the main difference. What is a bond is a creditor's property right to demand the return of the amount paid plus the interest paid. It does not allow the holder to become the owner of the share of the company that issued it, and take part in the activities of the issuing firm.

In addition, bondholders havethe preemptive right to repay the loan with respect to the holders of shares entitled to dividends. The same principle is maintained in the event of the issuer's bankruptcy. Analyzing with this

point of view, what is a bond, you can doconclusion that this is a more reliable security than the stock. Especially if it produced some stably developing state, which has good assets. In some situations, shares and bonds can be converted.

Like any securities, they are differentdepending on certain characteristics. What is a bond, if we consider it on these grounds? It can be different by type of issuer and by loan term, as described above. Moreover, the second characteristic can vary not only by the duration of the period, but also by the possibility of its change. In particular, there may be securities with a fixed maturity date and indefinite. Depending on the degree of ownership of bonds, they can be bearer and registered (when the holder is indicated on the document and in the logbooks).

These issue debt securities can be subdivided into target (for financing of certain projects) and ordinary. The type of bond placement can be free and coerced

lately. There is also a classification on the form of repayment of borrowed funds (in kind and in cash). The debt obligation can be extinguished by one-time payment or installments.

In addition, bonds are classified by methodpayments: interest only, only par value, the sum of the two previous ones at maturity, reorganization, periodic fixed income plus principal at the end of the loan period. The coupon rate can be different (floating, evenly increasing, minimal, mixed, unchanged). Paper can be convertible and vice versa, they also have a classification depending on the security of the security.

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