ROLEPLAY

Financial Adviser

Investor Of Equity Share & real estate

Investor Of Real Estate

Investor In Mutual Fund

Advisor Of Bonds

Investing In Bonds

Corporate Bonds

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Characteristics of Corporate Bonds9

Maturity Date“Corporation’s written pledge to repay a specified amount of money with interest.”

Interest Payments

Face Value

Bond Indenture

Trustee

Why corporations issue bonds1

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To get funds for major purchases.

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To improve financial leverage

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To fund ongoing business activities 4

Interest paid to bondholders is a tax deductible business expense

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When it is difficult or impossible to sell stock

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TYPES OF BONDS

Debenture bond

Mortgage bond

Subordinated debenture bond

Convertible bond

High Yield bond

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PROVISIONS OF REPAYMENTCall FeatureCorporation can call in or buy back outstanding bonds from current bondholders before the maturity date

Sinking fundCorporations deposit money in this fund annually or semiannually and use the money to pay off the bondholders when the bond issue comes due

Serial bondsBonds of a single issue that mature on different dates

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Bonds can be held until maturity or sold in the secondary market.

MECHANICS OF A BOND TRANSACTION

Most bonds sold through full-service

brokerage firms, discount brokerage

firms, or the Internet.

Generally a minimum

commission of $5-$35 on a $1,000

bond. Bonds are taxable.

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Government Bonds

and Debt Securities

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Three levels

State

Federal

Local municipalities

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Government Bonds and Debt Securities

Federal Securities16

Treasury Bills

Treasury Notes

Treasury Bonds

Treasury Inflation Protected Securities

Federal Agency Debt Issues

– Federal National Mortgage Association

– Government National Mortgage Association

– Federal Home Loan Mortgage Corporation

STATE AND LOCAL GOVERNMENT SECURITIES17

Municipal bonds– Issued by a state or local government– Use funds for ongoing costs & to build major projects

Features of Municipal Bond– People like to invest in projects close to home‒ They like insured municipal bonds that guarantee payment‒ It May be callable‒ Earning is higher (depends on use of funds)

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EVALUATE BONDS

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INTERNET

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ANNUAL REPORTS

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BONDRATINGS

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BOND YIELD CALCULATIONS

INTERNET19

It can be used in the following ways…….– Obtain the price information – Trade bonds online for a lower commission– Research information on the corporation or

government bond issues online

Some relevant Websites are……..– http://www.bonds-online.com/

– http://www.emuni.com/ – http://www.buysellbonds.com/– http://www.fmsbonds.com/– http://www.municipalbonds.com/– http://www.investinginbonds.com/

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ANNUAL REPORTSCorporations maintain web site that provides access to annual reports

BOND RATINGS• Bond ratings provide quality and risk associated with bond

issues• Moody’s Investor Service Inc., Standard & Poor’s Corporation,

and Fitch ratings provide bond ratings • Bond ratings generally range from AAA to D

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BOND YIELD CALCULATIONS

Current yield on corporate bond = Annual income amount

Current market value

Yield to Maturity Calculation=

$ Amt. Annual Interest + Face value - Market value Number of periods

Market value + Face value2

Thank you! That’s all!

PREPARED BY : HARDIK SHAHANIKTA TALPARA

PRIYANKA MANIYARISHITA VORAANKIT VORAGUIDED BY: (Dr.) NAVJYOT RAVAL