Question

List the four main issuers of bonds and differentiate among them

Answer 1

There are four main issues of bonds.

The Federal government issues treasury bonds which are default free because the government will make good on its promise payments Highway treasury bonds decline when interest rates rise so they are not free at all risk . The Federal government securities can be subdivided into two types

1. Non marketable debt

Savings Bond and bonds sold to government agencies

Original buyer cannot resell

Fixed interest rate

Can be redeemed before maturity with penalty

Represents about 25% of treasury debt

2. Marketable debt

Bills notes and bonds

Bills maturity up to 1 year issued on discount basis buyer space purchase price and receives par value.

Most original maturity between 1 year and 10 years phase semi annual coupons

Bonds original maturity between 10 and 30 years space semiannual coupons

B. Corporate Bond issued by Corporation these bonds are exposed to different levels of default credit risk depending on the issue in company statistics on the terms of specific dawn the higher the default risk the higher the interest rate and the issue Avast free corporate bonds are rated by standard and poor's and by movies with ratings ranging in quality from investment grade to junk bonds

C. Municipal bonds issued by state and local government Municipal bonds have default risk the main advantages that the interest on is tax exempt from both state and Federal taxes if the whole day is a resident of issuing state. As a result they carry rates lower than those on corporate bonds with some default risk they are two types of municipal bonds

General obligation bonds backed by the full taxing power of the municipality

Revenue bonds debt issued to finance a specific project and only revenue from that project used to repay the bond

Foreign bonds issued by foreign governments are formed Corporation these bonds are exposed not only to default risk but currency exchange rate risk as well. Issued in a domestic market by a foreign entity in the domestic markets currency as a means of raising capital for foreign firms doing a large amount of business in the domestic market issuing foreign bonds such as bill dog bonds.