Tue Yadanay Win “Summary of Chapter 3” serante Ths chopher discusses the types of bonds, their key characteristics, their procedures,and how bonds are traded among institutional investors and how bond market movements ave veporte d Bonds or lang-teimn loans issued by corporations, ond governments, where the borrower grees to repay the principal amount along with interest on specific dates. The four types of bonds one: 1 Tyeasury bonds: issued by Federal government, with lowest default vis k 2. Conporate bonds : issued by business firms, th the explosion to default sh 3. Monicipal bonds: issued by state and local government exposed 4o some defaulk risk, wi najer advantage over allother bonds 4. Foreign bonds : issued by foreign goveinment or a foreign corporation, with exposed to default visk + pithough all bonds have some common characteristics seach th one 1s different: according to their Lunique chavactenstics The foo camponents related to the bord s8ue ar€ the bond issuers, hich ove conporations, and fens, andthe other component is the bondhlde. Trustee is the firm that holds and manage tassels fo the corporations. The amount of manty the fren borrows and prorat? to pay back on he maturity date is called coupon payment. The two kinds of coupon interest rakes axe fixed-rate bonds and floatingrate bond 2270 coupon is akind of bond that pay no annual interest bot sold a4 discount Most of the bonds hove maturity date, ranging from 40 to HO years A callin abond allows the bond issuers to rédeern orcall back the bond before the mmatarity date, and Unis typically bond issuers becavae Urey would call back the high-interest fonds eaily and is5ut new ones at a lower intecst rake 40 Sove monty. thew art two kinds of se k-callabe and noncallable bonds. When the issuer Fecals, they must pay the bondholders @ great amount than pay values,and a call premium i$ on additional sum which is often equal 49 the one year’ interest. Nencallable bonds have call protection, generally § to 40 years Typically callable bonds offer mgher intexst rate than non-callobles Sinking funds provision facilitates for the bond issuerg to set aside the money over centage of the Issue each year. A failure to meet the Lime 4o buy back a specified per Gslana fond requirement. constisotes a default, which can lead 40 bankruptcy. To most cases, the 1ssuer handles the sinking fon rin wedemnption, Ord the second one 1 buying the requitd number of bonds on the Gpen markel. Motor there art sorne aphions which bord issuer and bond holdes con benefit frorn. Callable bonds allow the issuer the right 40 rehive the bond before the maturity fuloble bords gives invesiors the option 4 sell the bond back 40 the lesuer before moatuni yy offen used when seeking higher selva due to rising interest vate Bord valuation 1s determining the value oy price of bond Tt 15 important for invertors, tented markt ts aca the ated of inveding in ov 13suing bund: Key compon- ie upon payment face valve, morket inter rate, maturity dote, ond yeld 10 maturity Yield 4o moturity reflects the eonnings (Fall scheduled payments ove mode. Yield 42 Calls an approach that estimate the potential return in theerent the bond is sedeened by the inves before tS matorit To sump, this chapter provider a comprehensive understanding of the bonds, the type and characteristics, the bond market, the understanding of key elements suchas jnvestors, 185005, ond market participants in Ehe bond ear ket. J requirement in two woys. the First is to