Friday, May 27, 2011

Bond Definition

Bonds are debt / long-term debt in writing within the contract bonds are made ​​by the debtor is obliged to pay the debt with interest (bond issuer) and the party receiving payment or accounts receivable held together with interest (the bondholders) is generally without the encumbrance of an asset . Bonds when first sold sold with a value of par value.

The reason investors are buying bonds where the bonds have a fixed benefit payment at a certain period and the fluctuations in bond prices that go with the flow rate.
The interest rate increases will impact on bond prices in the capital market that will go down.

Bonds have value respectively given by companies or special institution by evaluating and analyzing the failure rate bonds. The value is ranged between A, B, C and D in which each value has 3 sub value except D, namely AAA, AA, A, BBB, BB, B, CCC, CC, C, D.

Value of AAA is the highest value that gives confidence that the company selling the bonds are able to restore both the debt and interest as promised. While the value of D states that the issuer likely will not be able to pay the debt with interest.

No comments:

Post a Comment

Post a Comment