Question
How do you think of this paragraph? We know that bonds are basically when companies or governments agencies need money to complete their projects, they
How do you think of this paragraph?
We know that bonds are basically when companies or governments agencies need money to complete their projects, they will issue bonds to investors. The investor may recover the funds and receive the interest at the interest rate set at that time on the bond repayment date. In this world, in order to consider the needs of investors, companies or governments may develop different types of bonds in the market. So, it causes that the type of bonds is various, and they are including corporation bonds, government bonds, zero-coupon bonds, Coupon bonds, long and short-term bonds, and so on. Although it exists so many various types of bonds, their purposes are similar. In addition, we also know that bonds with high-interest rates are risker than bonds with lower interest rates. Therefore, due to the diversity of bonds, investors can consider their own needs to purchase appropriate bonds. For a simple example, the level of the United States government bond is AAA, so it means that these bonds are risk-free. In contrast to corporate bonds, investors need not worry about the risk of bankruptcy. Therefore, if investors want to purchase corporate bonds, they should evaluate the firms receivables and credit to reduce risk. For another simple instance, if we want to purchase bonds for one year, we can choose to purchase short-term bonds and vice versa. This is the reason why we need these heterogeneous bonds because we can select the most appropriate bonds by our own needs.
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