Debt Securities - Corporate Bonds
Bonds are promissory notes, IOUs if you will, issued by a corporation or government to its lenders. They are usually issued in multiples of $1,000 or $5,000. The standard, or par, is $1,000. The bond indenture specifies the amount of interest to be paid at intervals, (usually every six months), over a specific length of time and the principal, (or original loan amount), to be repaid on the maturity date. A bondholder is a creditor; a shareholder is an owner.
Bonds are often secured, or backed by a specific pledged asset or other form of collateral. If the issuer defaults, bondholders have the right to liquidate its assets and recoup as much of their investment as they can. Here are some examples of secured bonds:
- Mortgage bonds
- Equipment trust certificates
- Collateral trust bonds
Other bonds are unsecured and are known as debentures. The debt is backed solely by the good faith and credit of the borrower. You have already read about a special class of debentures, convertible debentures, which were simply referred to as "convertible bonds" until now.
TYPES OF CORPORATE BONDS
There are many types of corporate bonds:
Though these instruments are risky, they aren't necessarily "junk". Read more in the article Junk Bonds: Everything You Need to Know to learn when junk bonds are a suitable investment.
Repos, fed funds, commercial paper, negotiable CDs and BAs are considered money-market instruments and, as such, they are almost as liquid as cash.
ProfessionalsTake a look at five primary reasons why financial advisors still choose to recommend mutual funds over other types of investment vehicles.
BrokersIndependent broker-dealers are a great choice for experienced, self-starter planners who have established practices.
Personal FinanceRIAs and brokers are held to different standards when providing investment advice. Here's how they differ.
Trading Systems & SoftwareLaunching your own broker-dealer is a lot of work, but the potential payoff is great, both personally and financially.
ProfessionalsLearn how to answer option questions on the Series 7 exam. Pass your Series 7 exam with the help of these tips.
ProfessionalsFINRA Series 55 Exam Guide
ProfessionalsFINRA Series 62 Exam Guide
ProfessionalsFINRA/NASAA Series 99 Exam Guide
ProfessionalsFINRA/NASAA Series 65 Exam Guide
ProfessionalsFINRA Series 6 Exam Guide
- No results found.
The exact nature of a financial advisor's job responsibilities determines whether he must have a Series 7 license. If a financial ... Read Full Answer >>
Financial advisors must possess various securities licenses in order to sell investment products. The specific products an ... Read Full Answer >>
The Financial Industry Regulatory Authority (FINRA) offers a variety of licenses that must be obtained before conducting ... Read Full Answer >>