for bba students

1. Submitted to: Prof Faisal Abass.
Submitted by: Muhammad Umer Khan.
Roll#=31

2.  BOND is a debt instrument in which an
investor loans money to an entity (corporate
or governmental) that borrows the fund for a
defined period of time at a fixed interest rate.
WHILE Prize bond is a lottery bond a non
interest bearing security issued to public

3. Bond is a debt security in which authorized
issuer owes the holders a debt. • It is a
formal contact to repay borrowed money with
interest at fixed intervals. • Plays an
important role in mobilization of capital

4.  TREASURY BONDS: issued by US govt. to
finance its deficits. These are free of default
risk.
 CORPORATE BONDS: Issued by corporation.
There is a high risk because of a company
defaulting.
 SECURED BONDS: have specific assets of the
issuer pledged as collateral for the bond. A
bond can be secured by real estate or other
assets.

5.  UNSECURED BONDS: are not backed by any
specific asset of issuer. More easily issued by
a company that is financially sound.
 GOVERNMENT BONDS: issued by govt. in its
own currency risk free bonds. When
issued in foreign currency then a referred as
sovereign bonds.

6.  TERM BONDS: That mature at a single specified future
date.
 SERIAL BONDS: Bonds that mature in installments.
 INFLATION LINKED BONDS: It provides protection
against inflation and is designed to cut out the
inflation risk of an investment.
 EXTENDIBLE & RETRACTABLE BONDS: Have no fixed
maturity date. Extendible can be extended on
demand of buyer while in retractable the date can be
reduced.
 ZERO COUPON BONDS: a type of bond that makes no
coupon payments but instead is issued at a
considerable discount to par value.

7.  FACE VALUE: The price of a bond when first
issued.
 COUPON RATE: The periodic interest
payments promised to bondholders are a
fixed percentage of bonds face value OR
simply the interest rate.
 MATURITY: The time until the principal is
scheduled to be repaid.

8.  CALL PROVISIONS: some bonds contain a
provision which enables the issuer to buy the
bond back from the bondholder at a pre-
specified price.
 PUT PROVISION: Some bonds contain a
provision due to which the buyer can sell the
bond at a pre-specified price before its
maturity date.

9.  A bond is generally a form of debt which the
investors pay to the issuers for a defined time
frame. In a layman’s language, bond holders
offer credit to the company issuing the bond.
 Bonds generally have a fixed maturity date.
 All bonds repay the principal amount after
the maturity date; however some bonds do
pay the interest along with the principal to
the bond holders.

10. Bond valuation is a technique for determining
the theoretical fair value of a
particular bond. Bond valuation includes
calculating the present value of
a bond's future interest payments, also
known as its cash flow, and the bond's
value upon maturity, also known as its
face value or par value.

11. All bonds have the following characteristics:
1. A maturity date- typically 20-25 years.
2. A coupon rate- the rate of interest that the
issuing company pays to the holder.
3. A face value- usually $1000 or $5000.

12. The value of a bond is the sum of the present
value of the annual interest payments plus
the present value of the face value;
Where; interest = coupon rate x face value
r = discount rate n = years to maturity