Bonds I can Identify the different types of bonds Explain what effects the return from investing in a bond Describe why some bonds are risky Identify common bond investment strategies Background on Bonds ID: 641803
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Slide1
By: Abby, Heaven, Mariah, Sherrie, Courtney, Hope, and Emily
BondsSlide2
I can…
Identify the different types of bonds
Explain what effects the return from investing in a bond
Describe why some bonds are risky
Identify common bond investment strategiesSlide3
Background on Bonds
Bonds: long-term debt securities issued by government agencies or
c
orporations
Par
Value: for a bond, its face value, or the amount returned to the investor at the maturity date when a bond is due
Call
feature: a feature on a bond that allows the issuer to repurchase the bond from the investor before maturity
Convertible
bond: a bond that can be converted into a stated number of shares of the issuer’s stock if the stock price reaches a specified price
Yield to
maturity: the annualized return on a bond if its held to maturitySlide4Slide5
Types of Bonds
Treasury
Bonds: A long term debt securities issued by the U.S Treasury.
Municipal
Bonds: A long term debt securities issued by state and local government agencies
Federal Agency Bond: Long-Term debt securities issued by the federal agencies
Corporate Bonds: Long-Term debt securities issued by large firms
High-yield (junk) Bonds: Bonds issued by smaller, less stable corporations that are subject to a higher degree of default riskSlide6
Valuing a Bond
Risk premium: the extra yield required by investors to compensate for the risk of default
Default risk: Risk that the borrower of funds will not repay the creditors
Call (repayment risk): The risk that a callable bond will be called
Interest Rate Risk: the risk that a bond ‘s price will decline in response to an increase in interest rates Slide7
Bond Investment Strategies
Interest Rate strategy: Selecting bonds for investment based on interest rate expectations
Passive Strategy: Investing in a diversified portfolio
Matching
Strategy: investing in bonds that will generate payments to match future expenses