Bonds
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Transcript of Bonds
BondsThe last subject of Fall 2011
What is a bond??A debt security (pay interest)A formal contract to repay borrowed money with fixed intervalsLike a loan
Lender (creditor) Borrower (debtor)
Provides Borrower with external fundsTo finance investments, or finance current expenditure
Bonds vs. StocksWhat’s the difference between bonds vs. stocks??
Stockholders have equity stake in the companyBondholders have a creditor stake in the company
Bonds have a defined term or maturityExceptions: consol bond: no maturity
Government BondsIssued by national governement usually in the country’s currency. First was issued by the English government 1693 (raise money against war with France)
English Bonds
US Bond
War Bonds
Generates capital for the governmentMakes civilians feel involved in their national militariesControls inflationEncourages spending (when liquidated)
Bond Rating