What is bond classification?
The classification of the binding is achieved by taking into account a number of factors. Although this may not always be done in the same way, there are certain factors that are common. These include security, convertibility and maturity of the bond. Bond classification also tends to take into account the price and way of transmission.
One of the factors considered in the bond classification is the safety of an individual's investment. This security is largely measured by assessing whether the binding purchased is secured. If the bond is secured, there are assets that are used as collateral. If the issuer fails to pay bond holders, as agreed, the individual can theoretically use the collateral to obtain what is for him.
bonds that are not supported by collateral are often referred to as bare bond. When the investor buys such bonds, he risk more. The only security it has regarding repayment is generally the reputation and credit of the issueritWorityness.
by the second factor considered in the classification DLuhopis is the transferability of the asset. Convertible bond is a bond that can be exchanged for other types of securities such as ordinary stocks. Although these bonds tend to have lower interest rates, there are usually aspects that investors can consider attractive. For example, a convertible bond generally receives interest on the absence of a stock prices.
maturity is the third factor of bond classification. Speaking of maturity with regard to bonds, the deadline concerns the point where the bond holder will be repaid. When assessing maturity, the range between the date of purchase and the redemption date is considered. Some bonds have a number of maturity data that include investors regularly repay certain parts of their money.
The price is the fourth factor considered in the classification of bonds. In this sensue, the price does not focus strictly at expense, but rather whether there is a discount. Bonds are consideredfor discounted when they are sold below their nominal value. For example, a bond is sold under par or discount if it can be applied for $ 100 (USD), but can be purchased for $ 50.
The final classification factor is to assess whether the asset is a wearer's bond or a registered bond. This is known as the transmission method. The bearer is basically one that anyone who has a bond can redeem because it has no name. These bonds can be easily transferred from one side to the other. A registered bond is one that displays a person's name entitled to pay interest and main.