Characteristics, Uses and Taxation of Investments - Callable and Foreign Bonds and Promissory Notes
vi. Callable: a bond is callable if the issuer can retire it and issue a bond with a lower interest rate. The ability of a bond to be called is a feature that is common to corporate bonds, particularly of a lesser quality which bear a higher rate of interest. Planners should note that the purchase of a callable bond may subject the holder to reinvestment risk if the bond is called since the investor has to find a fixed income instrument of similar quality and with a comparable interest rate.
e. Foreign Bonds: these are obligations of both developed and developing foreign governments and companies.
- Corporate - these are the tradable obligations of foreign corporations.
- Sovereign - the debt of foreign governments that trades in the secondary market. Such bonds are subject to political risk and liquidity risk.
Common Stock: Categorization