{"id":7969,"date":"2013-01-29T09:09:05","date_gmt":"2013-01-29T09:09:05","guid":{"rendered":"http:\/\/vskills.in\/certification\/tutorial\/?p=7969"},"modified":"2024-04-12T14:13:57","modified_gmt":"2024-04-12T08:43:57","slug":"bonds-and-debentures-2","status":"publish","type":"page","link":"https:\/\/www.vskills.in\/certification\/tutorial\/bonds-and-debentures-2\/","title":{"rendered":"Bonds and Debentures\u00a0"},"content":{"rendered":"<div class=\"wp-block-image\">\n<figure class=\"aligncenter size-large\"><a ref=\"magnificPopup\" href=\"https:\/\/www.vskills.in\/certification\/tutorial\/wp-content\/uploads\/2020\/12\/MEANING-AND-SCOPE-OF-ACCOUNTING-66.png\"><img loading=\"lazy\" decoding=\"async\" width=\"750\" height=\"400\" src=\"https:\/\/www.vskills.in\/certification\/tutorial\/wp-content\/uploads\/2020\/12\/MEANING-AND-SCOPE-OF-ACCOUNTING-66.png\" alt=\"Bonds and Debentures\u00a0topic details\" class=\"wp-image-92730\" srcset=\"https:\/\/www.vskills.in\/certification\/tutorial\/wp-content\/uploads\/2020\/12\/MEANING-AND-SCOPE-OF-ACCOUNTING-66.png 750w, https:\/\/www.vskills.in\/certification\/tutorial\/wp-content\/uploads\/2020\/12\/MEANING-AND-SCOPE-OF-ACCOUNTING-66-300x160.png 300w\" sizes=\"auto, (max-width: 750px) 100vw, 750px\" \/><\/a><\/figure>\n<\/div>\n\n\n<p><a href=\"https:\/\/www.vskills.in\/certification\/tutorial\/business-accountant\/\" target=\"_blank\" rel=\"noreferrer noopener\">Go back to Tutorial<\/a><\/p>\n\n\n<h3><strong>Bonds and Debentures<\/strong><\/h3>\n<p>Let&#8217;s learn more about bonds and debentures.<\/p>\n<p><b>Bonds: <\/b>A bond is an instrument of indebtedness of the bond issuer to the holders. It is a debt security, under which the issuer owes the holders a debt and, depending on the terms of the bond, is obliged to pay them interest (the coupon) or to repay the principal at a later date, termed the maturity. Interest is usually payable at fixed intervals (semiannual, annual and sometimes monthly). Very often the bond is negotiable, i.e. the ownership of the instrument can be transferred in the secondary market.<\/p>\n<h4><b>Types of Bonds<\/b><\/h4>\n<ul>\n<li><b style=\"line-height: 1.714285714; font-size: 1rem;\">Fixed-rate bonds: <\/b><span style=\"line-height: 1.714285714; font-size: 1rem;\">The interest rate remains constant throughout the life of the bond.<\/span><\/li>\n<li><b style=\"line-height: 1.714285714; font-size: 1rem;\">Floating rate bond:<\/b><span style=\"line-height: 1.714285714; font-size: 1rem;\"> It has a variable interest rate that is tied to a benchmark such as a money market index.<\/span><\/li>\n<li><b style=\"line-height: 1.714285714; font-size: 1rem;\">Zero-coup bond: <\/b><span style=\"line-height: 1.714285714; font-size: 1rem;\">They do not bear interest, but are sold at a substantial discount from their par value.<\/span><\/li>\n<li><b style=\"line-height: 1.714285714; font-size: 1rem;\">Inflation indexed bonds:<\/b><span style=\"line-height: 1.714285714; font-size: 1rem;\"> Under these types of bonds the principle is indexed to inflation.<\/span><\/li>\n<li><b style=\"line-height: 1.714285714; font-size: 1rem;\">Securitized bond:<\/b><span style=\"line-height: 1.714285714; font-size: 1rem;\"> Under this category interest and principal payments are backed by an underlying cash flow from another asset.<\/span><\/li>\n<li><b style=\"line-height: 1.714285714; font-size: 1rem;\">Sovereign Bonds<\/b><span style=\"line-height: 1.714285714; font-size: 1rem;\">: In deposit terminology, the term Sovereign Bond refers to a debt instrument bearing interest and issued by a country. As with all bonds, a Sovereign Bond generally promises to pay a certain amount on a certain date, as well as period interest payments generally termed coupons.<\/span><\/li>\n<li><b style=\"line-height: 1.714285714; font-size: 1rem;\">Corporate Bonds<\/b><span style=\"line-height: 1.714285714; font-size: 1rem;\">: A corporate bond is a bond issue by a corporation. It is a bond that a corporation issues to raise money effectively in order to expand its business. The term is usually applied to longer-term debt instruments, generally with a maturity date falling at least a year after their issue date.<\/span><\/li>\n<li><b style=\"line-height: 1.714285714; font-size: 1rem;\">Gilts<\/b><span style=\"line-height: 1.714285714; font-size: 1rem;\">: Gilt-edged securities are bonds issued by certain national governments.<\/span><\/li>\n<li><b style=\"line-height: 1.714285714; font-size: 1rem;\">Subordinated bond<\/b><span style=\"line-height: 1.714285714; font-size: 1rem;\">:&nbsp; subordinated debt is debt which ranks after other debts should a company fall into liquidation or bankruptcy.<\/span><\/li>\n<li><b style=\"line-height: 1.714285714; font-size: 1rem;\">High-yield bonds: <\/b><span style=\"line-height: 1.714285714; font-size: 1rem;\">A high-yield bond (non-investment-grade bond, speculative-grade bond, or junk bond) is a bond that is rated below investment grade. These bonds have a higher risk of default or other adverse credit events, but typically pay higher yields than better quality bonds in order to make them attractive to investors.<\/span><\/li>\n<li><b style=\"line-height: 1.714285714; font-size: 1rem;\">Fully Convertible Debentures\/bonds:<\/b><span style=\"line-height: 1.714285714; font-size: 1rem;\"> A type of debt security where the whole value of the debenture is convertible into equity shares at the issuer&#8217;s notice. The ratio of conversion is decided by the issuer when the debenture is issued. Upon conversion, the investors enjoy the same status as ordinary shareholders of the company.<\/span><\/li>\n<li><b style=\"line-height: 1.714285714; font-size: 1rem;\">Partly Convertible Debentures\/Bonds: <\/b><span style=\"line-height: 1.714285714; font-size: 1rem;\">Debentures where a portion of the face value is converted into equity shares and non-convertible part is redeemed on maturity. In this case, the binds are partly converted into a fixed number of shares if the issuing company and the remaining portion are redeemed in the form of money paid on maturity.<\/span><\/li>\n<li><b style=\"line-height: 1.714285714; font-size: 1rem;\">Non-Convertible Debentures\/Bonds: <\/b><span style=\"line-height: 1.714285714; font-size: 1rem;\">These bonds are non-convertible and on maturity the entire proceeds are paid out in the form of money.<\/span><\/li>\n<\/ul>\n<div class=\"apply\">\n<p><a href=\"https:\/\/www.vskills.in\/practice\/business-accountant\" target=\"_blank\" rel=\"noopener\"><img loading=\"lazy\" decoding=\"async\" class=\"size-full wp-image-92060 aligncenter\" src=\"https:\/\/www.vskills.in\/certification\/tutorial\/wp-content\/uploads\/2020\/12\/Add-a-subheading.png\" alt=\"certified business accountant free practice test\" width=\"960\" height=\"150\" srcset=\"https:\/\/www.vskills.in\/certification\/tutorial\/wp-content\/uploads\/2020\/12\/Add-a-subheading.png 960w, https:\/\/www.vskills.in\/certification\/tutorial\/wp-content\/uploads\/2020\/12\/Add-a-subheading-300x47.png 300w\" sizes=\"auto, (max-width: 960px) 100vw, 960px\" \/><\/a><\/p>\n<\/div>\n\n\n<p><a href=\"https:\/\/www.vskills.in\/certification\/tutorial\/business-accountant\/\" target=\"_blank\" rel=\"noreferrer noopener\">Go back to Tutorial<\/a><\/p>\n","protected":false},"excerpt":{"rendered":"<p>Go back to Tutorial Bonds and Debentures Let&#8217;s learn more about bonds and debentures. Bonds: A bond is an instrument of indebtedness of the bond issuer to the holders. It is a debt security, under which the issuer owes the holders a debt and, depending on the terms of the bond, is obliged to pay&#8230;<\/p>\n","protected":false},"author":1,"featured_media":0,"parent":0,"menu_order":0,"comment_status":"closed","ping_status":"closed","template":"","meta":{"footnotes":""},"categories":[3333],"tags":[2083,6716,2882,2883],"class_list":["post-7969","page","type-page","status-publish","hentry","category-business-accounting","tag-bonds-and-debentures","tag-business-accountant","tag-business-accountant-certification","tag-certification-business-accountant"],"acf":[],"yoast_head":"<!-- This site is optimized with the Yoast SEO plugin v24.5 - https:\/\/yoast.com\/wordpress\/plugins\/seo\/ -->\n<title>Bonds and Debentures\u00a0 - Tutorial<\/title>\n<meta name=\"description\" content=\"Bonds and Debentures are an important topic in accounting. 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