Bond Market Part 2
This collateral has the potential to be sold to repay the bond. Higher interest rates are associated with subordinated debentures because the bondholder assumes risk because the bond is unsecured.
Convertible bonds are special types issued by a corporation that are able to be converted into stocks. When you receive interest payments on your bonds, it will usually be every 6 months. The way you are paid depends on whether you hold a registered bond, registered coupon bond, bearer bond, or zero-coupon bond. You'll get an interest check mailed directly to you if you have a registered bond, because it is registered in your name. With a registered coupon bond, you'll get principal only, not interest.
A bearer bond is not issued in your name and you must present a coupon to redeem it. This is risky because you must hold onto that coupon. You'll only earn if the face value at maturity has gone up with a zero-coupon bond. You do have the option of holding onto or selling your bonds.
You have probably heard the term “savings bonds”. You do not have to pay federal income tax on these “Series EE” bonds until the bonds are redeemed. Bonds can be a worthwhile way to invest your money where you cannot touch it, yet it will make a little money for you in the meantime.
back to Bond Market Part 1