Zulfiqar Hasan

A bond is a debt instrument issued for a period of more than one year with the purpose of raising capital by borrowing.

Corporate bonds are debt instruments because money is lent to a corporation. In taking money, the corporation issuing the bond promises interest (also called "coupon").

Corporate bonds, issued by a Corporation, are meant to raise the funds for the company’s expansion plans.

Types of Corporate Bonds

Based on Interest payment, corporate bonds can be classified:
1.Coupon Bond
2.Zero Coupon Bond

Based on Security
1.Secured Bond
2.Unsecured Bond

Based on Control (Ownership)
1.Government Bond
2.Private Bond
3.Foreign Bond

Based on Maturity
1.Fixed Maturity Bond
2.Perpetual Bond

Based on Trading Location
1.Domestic Bond
2.International Bond

Based on Performance in the Market
1.Blue Chip Bond
2.Junk Bond

Based on Convertibility
1.Convertible Bond
2.Non-Convertible Bond

Based onCallability
1.Callable Bond
2.Un-callable Bond

Why Corporations issue Bonds?

The basic reasons are:
01. To raise capital for their business for investments

02. To Reduce the Cost of Capital

03. To Effect Tax Saving

04. Long-Term Financing

05. Avoid long-term financing from banks

06. Efficiency of management

07. Lower interest payments

08. No Dilution of Stockholder's Equity

09. Call options by the company

10. Convertibility options by the company

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