Bonds

awindsor200 asked:


I am not an economist. If the USA runs up debt serviced by bonds, at present China buys the debt as bonds, gilts etc. This sounds ominous. This encourages US debt and keeps bond yields low, as they can easily find a buyer at present ? Surely it can all go horribly wrong if China, amongst others, stop buying ? My real question is why do they buy up US debt? What is the advantage for China in terms of dollar yuan exchange rates ?

JORGE

Kyle J. Norton asked:


Debentures are loans, secured by a corporation, municipality or government. Bonds and debentures are instruments that provide for a maturity at which time the principal will be repaid. In addition to the payback of principal, the borrower will pay interest at stated intervals, usually semi-annually.

There are four common types of bonds and debentures:

1. Government bonds and debentures

2. Corporate bonds and debentures

3. Domestic bond funds

4. International bond funds.

In this article, we will discuss the overall concepts of bonds and debentures

a) Security

*Bonds are considered as secured debt. If the borrower defaults, the assets can be seized to satisfy the bondholder.

* Debentures, on the other hand, are unsecured, but are supported by the general credit of the corporation, municipality or government issuing the bonds. When issued by governments, there is the ability to raise taxes to honor their repayment obligation.

b) Contract features

Bonds and debentures are prominent players in the debt market. They come in 3 maturity durations.

i. Short Term: three years or less.

ii. Medium Term: three to five years.

iii. Long Term: more than ten years

and the most common features in the contract are

i. Identify the Term to maturity.

ii. Show interest payment structure.

iii. Provide a coupon rate.

iv. Indicate the valuation and pricing.

In bonds and debentures, the issuer is the borrower and the lender is the bond owner. when bonds are sold on the secondary market, the ownership changes. Each bond that is sold requires the presentation of a prospectus. Prospectus is a document that lists the name of the issuer, bond features, assets securing the loan and other details. In addition, a prospectus also gives the company background, purpose of the bonds and other information of value to the buyer.

There are types of bonds, but the two most common are Bearer Bonds and Registered Bonds.

i. Bearer bonds are owned by the holder and are issued with coupons for interest payments.The holder may sell the bond at any time.

ii. Registered bonds are registered with the issuer who keeps a record of the owner. They may only be sold by the registrant and interest payments are made by check to the registered owner.

Other Corporate Bond types include

i. Redeemable bonds.

ii. Callable bonds.

iii. Retractable bonds.

For bonds of these types, the principal amount borrowed may be paid back anytime prior to maturity and thirty days notice is generally required before exercising the option.

c) Bond and Taxation

If a bond is sold before maturity, it can be sold using any of the following three methods

i. At Par: yield will be identical to the coupon rate.

ii. At Discount: yield will be less than the coupon rate.

iii. At a Premium: yield will be more than the coupon rate.

Bonds are taxed on a bond year basis and attract taxation in two ways

i. 1. Capital Gains. The adjusted cost base of a bond is the purchase price plus any sales commission less any accrued interest paid. Any profit is considered a capital gain and any loss is considered a capital loss.

ii. Coupon rate or interest earned

d) Government bonds

Government bonds are debentures. The investment risk is nil due to the federal government’s ability to increase taxes which will generate additional income to make bond payments. These bonds and debentures are subject only to interest rate risks. Government bonds can be used to satisfy the following investment objectives:

i. Provide income.

ii. Ensure safety of principal.

iii. Very Liquid.

They are taxed on a bond year basis and are eligible for any deferred tax saving plan.

I hope this information will help. If you need more information, you can read the complete series of the above subject at my home page:

http://lifeanddisabitityinsuranceunderwriter.blogspot.com/

http://financialinvesting09.blogspot.com/

http://financialinvesting13.blogspot.com/

All rights reserved. Any reproducing of this article must have all the links intact.



JOSIAH

00Agente asked:

A trailer of a movie showing a duel between Daniel Craig and Pierce Brosnan

JAMAR

Vegeta3773 asked:

Trailer of the Second Naruto Shippuuden Movie

REX

uctelevision asked:

Dudley Herschbach, Professor of Science at Harvard and winner of the Nobel Prize for chemistry, delivers the Hitchcock Lecture at UC Berkeley. He explores the fascinating world of molecular science for a general audience as he discusses how molecular bonds are made and broken. Series: UC Berkeley Graduate Council Lectures [2/2006] [Science] [Show ID: 11176]

JASON

Ron Victor asked:


Introduction:

Construction bond is a form of surety bond which is a mandatory for financial investors for large construction and federal construction projects. The principal has given the written statement that he will complete the entire contract according to the norms. He will complete the contract at no additional cost, in case the contractor fails to perform his obligation. Since construction bond is a risk management bond, it is not guaranteed that it will complete the construction projects. This bond will protect interest of the individual and other structure that the construction has been taken place as per contract.

Generally construction contractors are well known with the concept of securing surety bonds, but they do not know that they will create a relationship between the principal, the obligee, the surety.constrution lawyers, are aware of the legal rules and act of the principal, obligee, and surety, but they are not aware of knowledge of obtaining bonds. This article directs both contractors and lawyers.

A construction surety bond is a written statement that the contractor will perform

His obligation as per bond. It guarantee that the principal will perform his obligation .if he fails the contract becomes void and he will sued in the court for further actions.constrution bond is otherwise called “condition bond”. If the principal fails to perform his obligation, both the principal and the surety will be asked to pay penalty amount.constrution surety bond are of different types like bid bond, performance bond, payment bond.

Bid bond:

A bid bond is a written statement which guarantees to the obligee that the principal will offer his bid, as awarded in the contract. In this type of bid, both principal and the surety are sued, in failure of their contract. They have to pay the additional expenses incurred by the obligee for breaking of contract. The penalty amount will be ten to twenty percent of the contract. If the principal refuses to bid the surety has to undergone the risk.

Performance bond:

This bond guarantees the obligee that the contractor will finish his contract as per terms and condition relating to time and price. The obligee is the owner of the contract and he may sue the principal and the surety, in failure of the contract. If the principal fails, he may ask the surety to perform or complete the contract. The surety has his choices of completing the contract, either with his own construction contractor or selecting another contractor to complete the contract or paying the additional cost to the owner, to complete his contract. The penalty amount paid by the principal and the surety will be amount of construction contract. If the surety himself constructs the contract with his own contractor then the penalty amount will be nullified. Here the surety has to take the full risk of constructing the contract without loss of time and money of the obligee, I.e the owner. Performance bond usually protect the interest of the owner against any fraud or misrepresentation.

Payment bond:

In this type of bid, the obligee i.e the owner will give a written statement to the principal that he/she will pay the contract amount has mentioned in the bond without fail. This bond protect the principal against risk, incase of failure of the contract by the owner. It also ensures that the subcontractor and the suppliers also act as per contract. Incase of failure of contract the principal may sue against the obligee or he may Break the contract.

Supply bond:

It is a bond created between the principal and the suppliers or subcontractors, that they will supply the material or completes the contract with in stated period as mentioned in the contract. It protects the principal against loss of time and value.

Construction bond has its merits and demerit.

Merit of construction bond:

It ensures the obligee that the contract will be completed within stated period.

The principal ensures that he will finish the contract as per norms.

It improves the reputation of the constructor or the contractor.

It improves the quality & quantity of work

Demerits of construction bond:

If contractor fail, the accountability of completing the contract, belongs to the surety.

Once contract has been signed, then no one can break the contract, though the contract not taken place under legal procedure.

Conclusion:

Construction bond ensures proper completion of contract with in stated period. Thus construction bond protect, both the principal and the obligee.Here the full risk as been undergone by the surety. Incase if failure on both the side he has take the risk



LYNDON

F D asked:


What is the crucial role of weak chemical bonds (like ionic, hydrogenm abd van den waals interactions) in the organization of living materials?

JORGE

Ron Victor asked:


Stability of surety bond market, most of the people try to differentiate the meaning of issuance of surety bond with stability of surety bond market. Actually, the meaning and the concept of these two terms are totally different. They both are not one and same. The term issuance of surety bond refers to offering surety bond to the general public at different surety bond amount. While stability of surety bond market is that, attaining a strong position in the market and constantly retains the position in the market. This is known as stability of surety bond market. Generally in a surety bond market, it is difficult to ascertain the stability of the market. Fluctuation usually occurs either in issuance time or stability of surety bonds in the market. Changes are uncertain and it is difficult to ascertain when it occurs.

Market finds changes at any time. Nowadays, stability of surety bond market becomes constant in most of the time. Most of the people tend to purchase surety bond from the bonding company. Surety bonds are of different types and it is issued in separate bond forms and at preferable bond amount. As per the requirements and needs of the people, surety bonds are issued to the public. More number of companies is ready to issue surety bonds to the general public. This surety bonds are issued as per the rules and regulations of state and federal government of appropriate state. The principal guarantees the obligee that he will satisfies the words filled in the bond without any default.

Most of the industrial companies started issuing surety bond to all the members. Nowadays, surety bond is almost needed in every part of the world. Today bond becomes an important and essential part in every business formalities and at the same time, it legally compiles. This is the main reason for the stability of surety bond. The common reason for the issuance of surety bonds is to protect the public i.e. the obligee against any unforeseen act or default act of the principal. Most of the contractors enter in to a contract and does not complete the contract work as per the terms and conditions of the contract. When basic requirements are legally compiled in the market, then the position of the surety bond market will be constant.

Sometimes they obtain payment from the obligee and fail to perform the work and sometimes the principal fails to pay any payment to the subcontractors for the labor and material supplied. In all this cases, when surety bond is obtained from the principal, obligee can claim for the damages or losses occurred. To facilitate the general public, different kinds of surety bonds are issued by the bonding companies to his clients. From this point, we can come to know about the stability of surety bond in the market. Usually, stability of surety bond market is difficult to ascertain but know because of its firmness, it is easy to define the stability of the surety bond market. When stability of surety bond market is at higher position we can easily define that nowadays, more number of surety bonds are issued to the general public.



HARRISON

John Morris asked:


The main difference between a stock and a bond is that stock gives you part ownership in a company whereas bonds are loans made by an investor. Rather than benefiting from company profits the way that stock holders do, bond holders receive a fixed rate of return – a percentage of the bond’s original offering price. The return is called the ‘coupon rate’. Bonds have a maturity date at which time the principal amount is returned. This makes bonds a more reliable investment, but they provide less potential reward.

1. Risk vs Reward

Although bonds typically have less risk than their stock counterparts, that doesn’t mean they can’t flop – bonds can still end up giving you no money at all. Companies with higher credit worthiness are more likely to be safe investments but their coupon rate will be lower than companies with lower credit ratings. Credit ratings are provided by firms such as Standard and Poor and Moody’s Investor Service. Credit ratings range from a high AAA to a low D.

2. Governmnet Bonds

US government bonds are considered to be the safest type of bonds. Blue chip corporations (those with established performance records that span over many decades) are also very safe bond investments. Smaller corporations have a greater risk of defaulting on their bonds, but bond-holders are preferential creditors and will get compensated before stock holders in the event that the business goes bankrupt.

3. Selling Your Bond

Bonds can be bought and sold on the open market. Their value fluctuates according to the level of interest rates in the general economy. For example, if you hold a $1000 bond that pays 5% per year in interest you can sell the bond at higher than face value as long as interest rates are below 5%. If they rise above 5%, your bond can still be sold but usually at less than face value. This is because investors are able to get a higher interest rate than what your bond pays so in order to offset the difference your bond has to be sold at a lower cost.

4. OTC Markets

The vast majority of bonds can be traded over the counter through banks. Some corporate bonds are also listed on stock exchanges and may be bought through stock brokers. New issues of bonds are usually sold in $5000 increments while bonds bought and sold after the initial issues are quoted in increments of $100. A bond that is listed at 96 is selling for $96 per $100 face value. For this reason, unless you are ready to make a big investment, you should probably stick to stocks.



STANLEY

EconomyCollapse asked:

US Treasury Bonds = Junk The Dollar is Dead

ISIDRO