What purpose does the variety in bond features (types and characteristics) serve?© BrainMass Inc. brainmass.com October 16, 2018, 6:54 pm ad1c9bdddf
What purpose does the variety in bond features (types and characteristics) serve?
Unlike stocks, bonds have finite lifetimes. The issuers of bonds determine the lifetimes before they sell the bonds to investors.
The date on which a bond comes due is called its maturity or maturity date. This bond feature will tell how long would the bond issuer's obligation be and when the investors can expect their principal amount invested back.
Callability is a bond issuer's privilege of redeeming its bonds early before they are ready to mature.
This bond feature will help the firm to save interest expense when interest rates are falling. When interest rates fall, they may want to replace any high-yielding bonds with newer, lower-yielding bonds.
A put provision allows the bondholder to redeem a bond at its face value before it matures. This bond feature will help the investors to do this when ...
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