A bond is a debt security whose owner has a „confirmation“ in the form of securities that he borrowed the particular company, city or state money for a certain time and a certain interest. Yield is the interest and the change of the bond price on the bond market. Bonds are very popular among investors because they are not as risky as stocks.
Bonds can be divided into government bonds, corporate bonds, mortgage bonds, municipal bonds.
For example: Corporate bonds (corporate and bank) for getting funds by issuing bonds are mainly chosen by large companies and corporations or big banks. Corporate bonds also provide interesting return in a more acceptable risk. Their yield is currently ranges from 6 – 8 %.
Advantages of invest to bonds (or bond owner):
- the opportunity to purchase a bond on a stock exchange or in banks
- the permanent overview of the development of investment (a stock exchange, internet, press)
- the lower fluctuation in price of bond as shares
- easy to forecast earning in the future
- the periodic and safe yield (especially in the state and municipal bonds)
- the higher yield than from term deposits
- the possibility of selling bonds before maturity in the stock market
- the opportunity to take a short-term lombard loans against based bonds
Note: lombard loans can solve the current problem of lack of money. For bonds pledged as collateral may entity receive from a bank a loan in the amount of about 60 to 90 % of the value based bonds.
A bond holder has after purchase following rights:
- to repay bond to the value of the invested capital
- for yield from holding the bond (interest)
- for eventual exchange for another bond, share or other security
- for eventual subscription of new shares of bond issuer
Rights of bonds generally passed to his heirs.There are exceptions (such as not transferable bonds), which is necessary to notify in the text of the bond, how to proceed in the case of death of the owner. Rights are imprescriptible to 10 years from the date of maturity of the bond.
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