Term
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Definition
- Government borrows funds by selling notes or bonds
- Notes' Maturities: up to 10 years
- Bonds' Maturities: 10-30 years
- Both in min denominations of 1,000 or more
- Both give semiannual payments called coupon payments
- Another difference btw notes and bonds: bonds may be callable during a given period (Last 5 years) - gives the treasury the right to repurchase the bond at par value: these have not been issued since 1980's, but there are some still outstanding.
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Term
| Eurobond (International Bonds) |
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Definition
- Bond Denominated in a currency other than that of the country in which it is issued
- Ex. A dollar-denominated bond sold in britain or anywhere outside US
- A yen-denominated bond sold outside japan (Euroyen Bond)
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Term
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Definition
- Issued by state and local governments
- Different from treasury and corporate bonds
- Interest Income is Tax Exempt (of federal income tax, also of state and local taxes)
- But capital gains taxes must be paid when the bond matures or if they are sold for more than the investor's purchase price.
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Term
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Definition
- Issued by private firms to borrow money directly from the public
- These pay semiannual coupons
- They return the face value at maturity
- Callable Bonds: Gives the firm the option to repurchase the bond the holder
- Convertible bonds: Gives the bondholder the option to convert each bond to a number of shares of stock
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