Question

What type of bonds apple has issued? which features make an issue attractive and unattractive to an investor? elaborate on the key features you would suggest on a future bond issue

Answer 1

There are different investment options that are offered by the companies. One of the example is the bonds issued by the Apple Inc. Apple is one of the top global companies that offer investment bonds that are called corporate bonds. These are the debt instruments issued by the companies to raise capital.They are called fixed income securities because they pay a specific amount of interest on the regular basis.

Features that make a debt issue attractive to customers is as follows:-

1.All the investors i.e the bondholders get the exact same deal with the same interest rate and maturity date.

2.Companies that need long term financing issues the long duration bonds or sometimes the perpetual bonds which provides the interest to the investor for longer periods.

3. For the companies, these corporate bonds are cheaper than the bank loans.

4. They are less volatile than stocks and sometimes, the interest payments are larger than the dividend payouts.

Features that make a debt issue unattractive to customers is as follows:-

1.Fixed rate bonds are subject to interest rate risk.

2. A company's bondholder may loose all money if company goes bankrupt. Their is no fixed estimate of how much money will be repaid to bondholders.

3.Bonds are subject to some other risks such as liquidity risk,credit risk, prepayment risk, exchange rate risk etc.

Key features on future bond issue is as follows:-

1. To set the coupon, the issuer takes into account the prevailing interest rate environment to ensure that the coupon is competitive with those comparable bonds and are attractive to customers.

2. The bond maturity is decided by the issuer. The longer the time to maturity, the more chances that a company has fail to repay.So, the maturity period should not be too longer.