The most comprehensive educational resources for finance

All About Bonds, Bond Mutual Funds, and Bond ETFs – Book Review

Esme Faerber introduces Bonds in depth to the reader in her book – All About Bonds, Bond Mutual Funds and Bond ETFs. The book promises to help the reader diversify their bond portfolio by understanding it better. It also explains the impact of economic changes on the bond market. All About Bonds, Bond Mutual Funds

The Handbook of Municipal Bonds

The Handbook of Municipal Bonds compiled by Sylvan Feldstein and Frank Fabozzi is a trustworthy guide that will help you navigate the world of municipal bonds. A variety of authors have contributed to several chapters classified under broad sections. The sections include the sell side, compliance issues, fixed income analysis of municipal products, and the

Arbitrage-free Valuation Approach for Bonds

The simplest way to calculate the value of a bond is to take the cash flows of the bond till its maturity and then discount them by a single discount rate. The method is quick but not very accurate because the yield curve is not flat and the interest rates are different for different maturities.

Calculate the Value of a Zero-coupon Bond

Suppose you have a pure discount bond that will pay $1,000 five years from today. The bond discount rate is 12%. What is the appropriate price for this bond?  Since there are no interim coupon payments, the value of the bond will simply be the present value of single payment at maturity.  

Calculate the Value of a Coupon Paying Bond

The value of a coupon paying bond is calculated by discounting the future payments (coupon and principal) by an appropriate discount rate. Suppose you have a bond with a $1,000 face value that matures 1 year from today. The coupon rate is 12% and the bond makes semi-annual coupon payments of $60. The bond yield

Overview of Structured Notes

Structured securities are hybrid securities that integrate the features of a debt instruments and a derivative. The motive behind creating a structured security is to lower the borrowing costs as well as to appeal to an audience such as institutional investors who would otherwise have some restrictions on what kind of securities they can invest

What are Medium-term Notes

Medium term notes are another type of corporate debt security. One of their unique characteristic is that the notes are not sold all at once. Instead they are offered continuously to investors by an agent of the issuer. The notes are registered with the SEC under Rule 415 (the shelf registration rule), which gives a

What are Corporate Bonds

Corporate bonds are bonds issued by corporations in order to raise money for their business. It is one of the major sources of financing by corporates after bank borrowing. The term corporate bonds is generally used for secured debt which is backed by collateral. The collateral can be real estate, plant and machinery, or even

Corporate Debt Securities and Rights of Bondholders

Apart from raising capital in the form of equity, corporates also borrow money to run their business. The most common form of borrowing is bank borrowing, which is the first choice for any corporation. Apart from bank borrowing, corporations around the world also have access to corporate debt market where they can raise debt directly

Overview of Municipal Bonds

We learned about the securities issued by the central government of a country (such as US Treasury). Along with that the local and state governments also issue bonds, known as municipal bonds (or municipal securities). Characteristics In the U.S., there is a large market for municipal bonds. Though there are both tax-exempt and taxable municipal