Posts Tagged ‘Credit risk’
Loans Business
Bonds are loans to governments and businesses to spend their funding needs. A bond has a maturity and returns periodically, usually annually, an interest payment (coupon) from. The amount of the coupon depends on the market rate at issuance, the maturity of the loan and the creditworthiness of the issuer. The better the credit, the lower the coupon. Almost all bonds for which a credit rating obtained from a rating agency.
The advantage of investing in bonds is to calculate in advance exactly how much the investment returns during the period will show. Periodic payments of the coupon is fixed for the duration and the bond at face value (deposit) paid off. This only applies if the bond is actually the maturity is arrested and the issuer is not intervening in financial trouble.