The definition of bonds is the recognition of the debt of the issuing party to the buying party (investor). The bonds show the nominal amount, interest and payment date and other agreements. So that a bond is a written promise to pay a certain amount of money on a certain date in the future and also interest every certain date. Bond buyers can sell back the bonds they have at any time. The sales time can be relatively short or long. So that the bonds purchased can be recorded as short-term or long-term investments. Investment in bonds will provide fixed interest income every period.
Definition of Bonds and the Types
• Guaranteed bonds, namely bonds guaranteed by the company.
The company guarantees the investors that if the company cannot pay its debts, the investors can claim the guarantee. This guarantee is in the form of fixed assets owned by the company (mortgage). The guarantee provided can be several levels, the first level guarantee means having the first claim. Second level guarantee, means that the claim against the guarantee is after the bond with the first guarantee.
Sometimes guarantees can be provided in the form of securities (stocks and bonds) the company owns.
• Unsecured bonds.
Bonds that can be exchanged for shares. This type of bond is also known as a bond that can be exchanged. This exchange is dependent on the wishes of the bond holder. If bonds can be exchanged for shares, investors can change their ownership into … Read More