MCS 2100 Chapter Notes - Chapter 12: Corporate Bond, Ask Price, Investment Banking
Document Summary
In cases of bankruptcy, certain bondholders are paid first, but after cra and employee payroll. Interest payments on bonds are required, dividends are paid at the discretion of the board: bondholders get paid before shareholders during bankruptcy. Types of bonds: debenture: a bond that is backed only by the reputation of the issuing corporation, they are not secured (backed by pledged assets) Includes all government bonds and most corporate bonds. If the corporation fails to make interest payments or repayment, these bondholders become general creditors. Provisions for repayment: call feature: a feature that allows the corporation to call in or buy outstanding bonds from current bondholders before the maturity date. Why investors purchase corporate bonds: stocks have higher returns than most bonds and treasury bills (t-bills) Stocks always beat bonds: myth or fact: most brokerage firms profits come from investment banking commissions on stocks, most commission is made on equities (stocks), then bonds, then money market funds.