Types Of Bond

In the United States where the bond market is the biggest in the world, there are different types of bonds. They can be classified in terms of their basic characteristics as follows:

Secured Bond
Such bonds attach the guarantee of fixed assets to the value of the bond. This gives the investor a guarantee that if the issuing organization defaults in the payment of principal and interest when they are due the property attached as a guarantee could be taken over by the bondholder.

Callable Bond
Certain bonds can be redeemed before maturity by paying a penalty or an early redemption charge. Such conditions are predetermined at the time of the transaction.

Convertible Bond
In most cases convertible bonds can be traded with other securities after a particular date during the maturity period.

Commercial paper
An investor may agree to lend credit to an organization for a short period of time in return for a mutually agreed rate of interest. Most commercial papers are negotiable instruments.

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Last Updated on : 10th July 2013

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