ACCA F9考試：Bonds

Bond—a written acknowledgement of a debt, usually given under the company's seal, containing provisions for payment of interest and repayment of principal. The debt may be secured on some or all of the company's assets.

In the UK, bonds are usually issued with a face value of £100.

They can be traded on the bond market and reach a market price.

Hence, if a bond is "selling at a premium of 15%", this means that a bond with a face value of £100 is currently selling for £115.

This indicates that the rate of interest on this bond is attractive when compared with current market rates, creating demand for the bond and a rise in price.*

In the US the face value of a bond is usually $1,000.

2. Deep Discount Bonds

Deep discount bonds—bonds issued at a large discount to nominal value (i.e. issued well below face value) and redeemable at par on maturity.*

With deep discount bonds, investors receive a large capital gain on redemption, but are paid a low rate of interest, if any, during the term of the loan.

These bonds offer a cash flow advantage to the borrower. This is especially useful for financing projects which produce weak cash flows in early years.

3.Zero-Coupon Bonds

Zero-coupon bonds—bonds issued at a discount to face value and which pay zero annual interest.

Zero-coupon bonds have the following advantages:

The issuing company pays no interest and the only cash payout is at the bonds' maturity.

Investors gain from the difference between issue and redemption price.