Why companies issue debt and bond?

July 8, 2024 No Comments

A: Companies issue bonds to finance operations. Most companies can borrow from banks, but view direct borrowing from a bank as more restrictive and expensive than selling debt on the open market through a bond issue. The costs involved in borrowing money directly from a

Why Do Companies Issue 100-Year Bonds?

July 8, 2024 No Comments

A: Although it is rare, companies and governments do issue bonds that exceed an average person’s life expectancy. For example, multi-billion dollar companies such as the Walt Disney Company (DIS) and Coca-Cola (KO) have issued 100-year bonds in the past. Many of these bonds and debentures

Why do longer term CDs pay a higher rate than the short-term CDs?

July 8, 2024 No Comments

A: To address this question, let’s employ the concept of distance. In the city, a short taxi ride from your hotel to a convention center might cost about $5.00. However, when you depart from your hotel for a ride to the airport located outside the

Why is Manchester United (MANU) carrying so much debt?

July 8, 2024 No Comments

A: The takeover of Manchester United by the Glazer family beginning in 2005 saddled the historic club with substantial amounts of debt, which is a source of continuing controversy for many long-time supporters of the club. The Glazers paid around £790 million for the team.

Why is my bond worth less than face value?

July 8, 2024 No Comments

There are two primary reasons a bond might be worth less than its listed face value. A savings bond, for example, is sold at a discount to its face value and steadily appreciates in price as the bond approaches its maturity date. Upon maturity, the

Why would a corporation issue convertible bonds?

July 8, 2024 No Comments

A: A convertible bond represents a hybrid security that has bond and equity features; this type of bond allows the conversion of its nominal value to either cash or a specified number of common shares of equal value. A corporation issues a convertible bond to

Yield vs Interest Rate

July 8, 2024 No Comments

A: The main difference between yields and interest rates is that each term refers to different financial instruments. Yield commonly refers to the dividend, interest or return the investor receives from a security like a stock or bond, and is usually reported as an annual

What is the difference between yield to maturity and holding period return yield?

July 8, 2024 No Comments

A: If an investor purchases a bond and holds it until maturity, his return will be equal to the yield to maturity (YTM). On the other hand, if the investor does not hold the bond until maturity (a common practice for long-term bonds), the total

What is the difference between yield to maturity and the coupon rate?

July 8, 2024 No Comments

A: A bond’s coupon rate is the actual amount of interest income earned on the bond each year based on its face value. A bond’s yield to maturity (YTM) is the estimated rate of return based on the assumption that it will be held until

What is the difference between yield to maturity and the spot rate?

July 8, 2024 No Comments

A: Bonds are marketable and relatively liquid securities, and there are several different accounting methods for discounting their values to give investors a sense of their present worth. The most common of these is called yield to maturity, or YTM, which represents the expected rate

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