A bond is a type of investment that represents a loan between a borrower and a lender. With bonds, the issuer promises to make regular interest payments to the investor at a specified rate (the coupon rate) on the amount it has borrowed (the face amount) until a specified date (the maturity date). Once the bond matures, the interest payments stop and the issuer is required to repay the face amount of the principal to the investor
Types of Bonds
Because the interest payments are made generally at set periods of time and are fairly predictable, bonds are often called fixed-income securities.
- Fixed Rate Bonds
- Floating Rate Bonds
- Zero Interest Rate Bonds
- Inflation Linked Bonds
- Perpetual Bonds
- Bearer Bonds
- Climate Bonds
Fixed Rate Bond
A fixed rate bond is a type of debt instrument bond with a fixed coupon rate. It pays the same level of interest over its entire term.
Floating Rate Bond
The Floating Rate Bonds have a variable rate of interest. They take advantage of the fluctuation in interest rates to generate quality returns for investors. These types of Bond are generally linked to a benchmark
Zero Interest Rate Bonds
A zero-coupon bond is a bond do not pay interest during the life of the bonds. These bonds trades at a discounted price, rendering a profit at maturity, when the bond is redeemed for its full face value
Inflation Linked Bonds
Inflation linked bonds are bonds that guarantee a return higher than the rate of inflation. They are generally linked to particular inflation index.
Perpetual bond is a bond with no maturity date. It pays interest to investor forever. As long as the perpetual bond owner holds the bond(s), they will continue to receive interest. T his makes perpetual bonds similar in nature to equity investments that pay dividends, rather than fixed-income or debt investments
A bearer bond is a type of bond issued by a company, a corporation, or government for which there are no records maintained about the ownership of the instrument, and whoever has the custody of the instrument is the owner of the instrument
Climate bonds are fixed-income financial instruments (bonds ) linked to climate change solutions. They are issued in order to raise finance for climate change solutions
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