aE EduTap for Instant Revision <— Bonds Market Ble 7241 FAhello@edutap.co.inFegular interest payments on the amount lent. Tonds are lice debt instruments that Investors give to companies or governments and in return compar 1.promise to pay you back your money ona certain date, and in the meantime, companies give the Investors we Parties }-[i.- One party i the taser and ae face value Cleo Known ax the par value oF principal the amount of HOMEY @ ‘other pariy will be Investors oF the general publ 2 price (CM). “The price at which, the bond is available ia the market is Known as GUITent MarRot ‘Gredie Rating in High-Risk, High-Reeurn investments “Credit Rating in Low-Risk, Low= ‘Return investments 3.Generall Lor cee Low Low [:Benents of credit rating agencies _]-{it help investors mate Informed decisions about where tomvest_] dotauting on its debt obligations. [ro countor that X¥Z. Company may offer a highor interest rate of which T= say. faking advantage of that rating, Reliance industries will oer a Tower ‘Reliance Industries would likely have a very high credit rating. Thie ns tht reat ratingrayemetex bettove that Reliance austen hss The possibility of losing money on an investment or business venture ZiReturn_ia the profit or loas an investor makes on an investment over ap there 1s 4 positive relationship between the risk and return, Risk Return High Risk High Return | (i.taze 4: Low inte Low return} | ‘Cave 2 Wigh Fiske Nigh case. the risks high amd therefore Une revurns will aise be highane nla nee Sane oF AER NNT MMO [I eee af ti eS Ge Bal 6 a ees ok i er er ewig [Eetnoctnniniyiegronpacehcbamanenrnibecias | Sie [ acne TR RE RAR TG Meal ne con por rnd i Re rn Way a] so I lb eats eine oe es bs De Te re sd ve a oa id fe ber te he inet Balad aor oe a EN ee a aT TT ont pr etn ie TH BSE Tal RA NT forme [aes bonts ox ere ee issn bet eeu ry {Dc oO Re rab) {ine naan “rpc bn ae ean ae orp abe aA TOS PSA ATS penton lip oem} eee a gaa a ret ere ring eta oe presen oa sp a STE Sea Betis tbl air pe) tee AT oT arlene ea wa bees alr aoe a ee De] ei br Sai ao eee aT [ge alert a al aa oe sew ehhpee Sea ae When interest rates fall, bond prices rise.. interest rates interest rates Ty bond prices bond prices When interest rates rise, bond prices fa (Hutodmnewa tore Tnterest on bonds, aso known a the coupon payment, the fed and predetermined amount that the bond issuer pays to bondholders or to Investors asa compensation for borrowing their money. Bond yields a measure ofthe total return an investor can expect from a bond. It considers the interest payments, the purchase price (of the bond, and its current market value. Tnterest Rate which borrower is paying tothe investor remains fixed, ‘Bond Velds can goand up down based onthe curent ‘market prices ofthe bond. Therefore its nt fixed. Tnierests determined by the Face value Ved of the bond Getermined by the Bond's Current Market Prices, Yield to Maturity = Taterest is esrental but doesnt account for the bond's market value changes, making yield 2 better gauge of performance. Yield provides amore comprehensive ew of the bond's overall performance and return potential“| varus cel ‘C= coupon payment n= number of payments i= interest rate, or required yield M= value at maturity, or par value Zero Coupon Bond Zero-Coupon _ _ Maturity Value Bond Value e (ti) wrt [erry ety a arg ea hava wSTON aa THOU se elsr+ EP Vara Va) ocean pied tng ead yor [Xalioon repayment oan refers to aToan on which only introns paid forthe We othe Toa and the entire principal spa atthe end of loan sie [saking dt fund to which rns make annual contributions tohave coowgh funds to mest alarge financial ity nthe tare. [Amortzing bonds are bonds in which the principals Fepald over the eof the bond alongwith Interest. [A morgage bond iva promise by We bond ksulng author to pledge eal proper as addional evcur pment Trast Bandi i he ue of bonds with equipment ike machinery av secur [fezeaerai} {1% at the se of he bond wil dtl on Get obigntonseaning Ratt wl be unable Hake ITE pp ENTEOF RAY He principalamount of te toan The Fsk that the price ofa Pond wil fall finterert ater es he coupon rate of the bond