What is an investment in a bond?
Bond investment is essentially an unsecured business or organization loan, and sometimes companies offer bonds as a way to get capital. This type of investment is often unsecured and is supported only by an investor's estimate of the credibility of the issuer. Usually, an indentation or contact between the parties involved, which states conditions and obligations, is required. However, accurate implementation of this transaction varies according to jurisdiction.
The risk associated with the investment of bonds is generally greater than that of traditional securities; As a result, it can offer a higher return. Intimate business knowledge of the issuer and limited market with these financial instruments is considered to invest in the bond investment. Such transactions are often gambling that the value of the unsecured notes of the company will increase along with the total value of the company.
Usually bonds are used by large organizations to increase working capital. The issuing company goes to the debt to investors until there is a navigthe grace amount plus any interest paid or transferred to an equal amount of shares; If bankruptcy occurs, holders of investment in bonds are considered creditors and must obtain consideration for the payment of the remaining assets of the company. Using this technique, the company can acquire capital without using its assets as collateral or give up the ownership share in society.
The return on the bond investment is listed in offset, as well as the concept of loan, and can be significantly higher than what to be expected to invest in the company's shares. However, a higher return comes at the expense of the ownership of society. In investment in the bond, the investor does not have the word about how the company uses money.
bond regulation of the insertion varies according to jurisdiction. In the United States, this type of investment applies to an unsecured corporate bond where there is no asset or flowEmpire assigned to repay the loan. However, the 1939 Indenture Trust Act requires that it to detach the fully publishing conditions of the transaction and the appointment of the bond administrator if the offer of debt exceeds $ 5 million (USD). If the issuer becomes unable to fulfill his financial obligations, the administrator may be entitled to entertain the company's assets and repay investors.
In the United Kingdom, a bond is usually provided by an assets fee or a mortgage secured for specific properties. As a result, the investment of bonds would not be given a more advantageous return rate than most traditional investments. In Canada, the loan is not provided by specific assets. In the case of bankruptcy, investors receive higher repayment status than other unsecured debt holders. The bond in any part of the world means assigning an asset to the issuer to ensure the conditions of the loan.