CIMA F2 Syllabus A. Financing capital projects - Conventional bonds - Notes 8 / 13
Conventional bonds
A debt instrument, offering
a fixed rate of interest (coupon)
over a fixed period of time
with a fixed redemption value (usually par).
Bonds may be issued by governments or companies.
Bonds issued by companies are known as corporate bonds'.
Here is an example of a bond that was issued by Oracle:
| Features of bonds | |
|---|---|
| Issued at par (unless deep discounted) | The coupon rate is fixed at the time of issue. |
| Marketable | The ability to sell the debt can mean that investors accept a lower return compared to the return demanded by a bank on a term loan. |
| Redeemable | Bonds are normally redeemable. Some bonds do not have a redemption date, and are 'irredeemable' or 'undated'. These are called perpetual bonds and are issued by banks. |