Many people nowadays have an interest in investing in securities, with one of the most common options being buying and selling bonds. Before making an investment decision, investors need to understand what bonds are and the relevant legal regulations. Let’s explore this topic with Shopdepre in the following article.
What Are Bonds? What Are Their Characteristics?
Bonds are a type of debt certificate issued by the issuer (borrower) that obliges them to repay a specified amount (the face value of the bond) to the bondholder (lender) at a specific time, along with a predetermined interest. The issuing company must repay the original borrowed amount when the bond matures.
Characteristics of Bonds
Bond issuers can be joint-stock companies, limited liability companies, the Ministry of Finance, enterprises with sufficient charter capital, state policy banks, and financial credit institutions that are eligible for government guarantees.
Bond buyers can be governments, businesses, or individuals. The name of the bond buyer may or may not be recorded on the bond.
Bondholders are individuals who lend money to the issuer, and they are not responsible for the results of the issuer’s capital use. The issuer of the bond is obligated to make payments based on the debt commitments specified in the loan agreement.
Bond income primarily consists of interest payments. This is a fixed amount, typically signed and independent of business results.
Bonds are considered a type of debt security. Therefore, if a company or enterprise goes bankrupt or dissolves, it must first repay bondholders before distributing to shareholders.
What Types of Bonds Are There?
The classification of bonds can be based on characteristics such as the issuer, form, nature, interest, and payment guarantee.
Based on the Issuer:
Corporate Bonds
Government Bonds
Based on Interest:
Fixed-Rate Bonds
Zero-Coupon Bonds
Floating-Rate Bonds
Based on the Payment Guarantee:
Secured Bonds
Unsecured Bonds
Based on Form:
Registered Bonds
Bearer Bonds
Based on the Nature of the Bond:
Convertible Bonds
Callable Bonds
Redeemable Bonds
In summary, these are the essential details and types of bonds, helping you gain a better understanding of bond investments and make informed investment choices. Wishing you success!
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