Chapter 14 Bonds

deep discount bonds

also referred to as zero-interest debenture bonds, are sold at a discount that provides the buyer's total interest payoff at maturity

secured bonds

bonds are backed by a pledge of some sort of collateral. Mortgage bonds are secured by a claim on real estate. Collateral trust bonds are secured by stocks and bonds of other corporations.

commodity-backed bonds

bonds are redeemable in measure of a commodity, such as barrels of oil, tons of coal, or ounces of rare metal

income bonds

bonds pay no interest unless the issuing company is profitable

callable bonds

give the issuer the right to call and redeem the bonds prior to maturity.

debenture bond

is unsecured. A "junk bond" is unsecured and also very risky, and therefore pays a high interest rate. Companies often use these bonds to finance leveraged buyouts.

bearer or coupon bond

not recorded in the name of the owner and may be transferred from one owner to another by mere delivery

revenue bonds

so called because the interest on them is paid from specified revenue sources, are most frequently issued by airports, school districts, counties, toll-road authorities, and governmental bodies

commodity-backed bonds and deep-discount bonds

what are the two types of bonds that have been developed in an attempt to attract capital in a tight money market?

registered bonds

Bonds issued in the name of the owner and require surrender of the certificate and issuance of a new certificate to complete a sale

term bonds

Bonds issued that mature on a single date are called

convertible bonds

If bonds are convertible into other securities of the corporation for a specified time after issuance, they are

serial bonds

Issues that mature in installments are called serial bonds. Serially maturing bonds are frequently used by school or sanitary districts, municipalities, or other local taxing bodies that receive money through a special levy.