Why Do Companies Issue 100-Year Bonds?

July 7, 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 interest rates have an inverse relationship with bond prices?

July 7, 2024 No Comments

A: At first glance, the inverse relationship between interest rates and bond prices seems somewhat illogical, but upon closer examination, it makes good sense. An easy way to grasp why bond prices move in the opposite direction as interest rates is to consider zero-coupon bonds,

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

July 7, 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 debt issued in both temporary and permanent forms?

July 7, 2024 No Comments

A: Debt is separated into two categories: 1) Temporary or short-term 2) Permanent or long-term. Temporary or short-term debt refers to debt with a maturity of less than one year. This means that the debt is due to be paid in less than one year.

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

July 7, 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 7, 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 company use a form of long-term debt to capitalize operations versus issuing equity?

July 7, 2024 No Comments

A: A firm that needs money for long-term, general business operations can raise capital through either equity or long-term debt. Whether a firm uses debt or equity to raise capital depends on the relative costs of capital, the firm’s current debt-to-equity ratio and its projected

Why would a corporation issue convertible bonds?

July 7, 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 7, 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

Which investments have the highest historical returns?

July 7, 2024 No Comments

A: Historically, investments in the stock market have experienced the greatest return. They have performed better than all other types of investments in the long run, but have a tendency to fluctuate from time to time. Analysts have found that stocks have held their position

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