Thursday, April 22, 2010

Different types of bonds

Bonds are easily converted intro the liquid cash in comparison to other source of the invest . In financial market depends on the pure debt reduce with the introduction of the different means of bonds. Main category of bonds are:

Secured and Unsecured bonds:

Secured bonds are backed by the assets that means the secured bond holder has the right sell the property related to the bond to get the amount back .Unsecured bonds doesn't arise any right of the holder of bonds on the assets o the company.

Convertible and non convertible bonds:

Convertible bonds are those which converted in the equity shares after the maturity period. Non convertible bonds carry interest on the investment portion its not transfer into equity shares.

Bonds market innovation:

Now a days the pure debt rarely used to collect the funds as this arise financial burden second one that the debt fund collected by any industry need to follow many rules and regulation as well as the restriction by the Industrial governing body that debt capital collected up to limited amount.

In the financial market there is new way of fund raising system invented which reduce the dependence on the pure debt.

1.Zero interest rate Fully convertible bonds:

Here the interest rate is 0 and the bonds converted into the equity shares after the maturity period .

Example: Suppose the market value of the bonds is rs10 after maturity rs 100 bonds converted into the 2 equity shares of rs35 each with premium rsrs30 on each.

2.Detachable Equity cu pons:

Here the bonds holder get the detachable equity cu pons which they transfer into the equity shares aft6er maturity or they are able to sale the detachable portion in the market.

3.Secured Premium Notes:

Here the investors get the flexibility ,that after a 4 or 7 years the investors are able to go for the equity transfer with pay the remaining amount or go for the nonconvertible portion with getting interest as well as capital appreciation .

4.Triple option convertible bonds:

Here the investor get the fully transfer option at the maturity of the bonds or go for non transferable option or get third one transfer the half portion into the equity shares and remaining in nonconvertible portion get the interest on that.

5.floating rate bonds:

This bonds interest rate changes with change in the market interest rate therefore these bonds are called floating rate bonds.

6.Extendibles Bonds:

Extensible bonds are those bonds,where the maturity periods are more than one here the issuer extend the maturity period with the changing market condition. If the interest rate arises than the holder can increase the maturity periods on the other hands if the interest rate reduce than the holder has right to sell the bonds.

7.Foreign currency bonds:

In this bonds the issuer country collect money from the homeland bonds holder and issue the foreign bonds this bonds help to the holder to get the benefits of the higher interest rate of the foreign country .

These bonds are know as Bulldog in UK and Samurai in Japan.

8.Govt. Bonds:

Govt. collect the debt amount to fulfill the gap of the fiscal deficit ,demand for the Govt. bonds is now a days increase as this is the safes means of investment.

9.Inflation rate bonds:

Now a days the European and the American market arise the funds by issuing the inflation bonds the market value of these bonds increase with the inflation,and the interest rate also provide a good source of income.

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