Question

What are some of the features that could be included with a bond prospectus that may have an impact on the yield of a new bond issue?

Answer 1

Some of the features that can be included in the the bond prospectus -

A. Callable feature- when the bonds will be callabe, it will mean that there will be a higher requirement of the bond yield because call feature is a benefit to the company.

B. Put option associated with Bond- when there will be put option associated with Bond it will help the investors to redeem the bonds before the maturity and it will offer a lower rate of bond yield.

C. Conversion feature of Bond- when the bonds are convertible into the equity shares, this will be an advantage to the bondholders and it will be leading to a lower yield on bonds.

D. Bonds associated with collateral- these bonds will be offering a low Yield because these are offering a very high security of collateral.

E. Bonds with lower credit rating- Bonds with lower credit rating will be providing a higher yield whereas bonds with higher credit rating will issue with lower bond yield.