MGCR 341 Lecture Notes - Lecture 6: Money Market, High-Yield Debt, External Debt
25 Jan 2017
School
Department
Course
Professor
Document Summary
When govs or companies want to borrow money they can sell a bond, also known as issuing a bond. War, social programs, fiscal stimulus, investment needs, refinance debts, buy back shares. Investors can buy these bonds in the primary markets. Main investors in govt bonds: foreign central banks. Main investors in corp bonds: pension and mutual funds, insurance companies. Most bonds are also re traded among investors in what is called the secondary market. Most bonds are traded over the counter, not on exchanges. People who own bonds are called bondholders, or creditors. Simple bonds: promise to pay back a fixed principal (or face value) at the bond"s maturity date, many bonds also pay fixed coupons at pre specified dates, including a final coupon on the maturity date. Failure to make a scheduled payment represents a default and may lead to bankruptcy. Annual coupon payments are stated as a percentage of the face value.
