Question

What is a bond and what different types of bonds are there?

When we sell a bond in the aftermarket what are some of the things we must consider?

Answer 1

A bond is a debt instrument which organizations use to raise funds. The bond holder agrees to lend the company money in exchange for periodic interest payments at regular intervals.

The different types of bonds are as follows:

Convertible and non-convertible:

Convertible bonds can be converted into equity shares. Non-convertible bonds cannot be converted into equity shares.

Zero Coupon bonds:

There is no interest payment involved. The bonds are issued at a discount.

When the bonds are sold in the market the folllowing things should be considered:

-Current rate of interest in the market

-Current market price

-Yield to maturity on the bond

-Duration of the bond