Canadian Corporate Bonds

There are organizations that decide to issue bonds in most cases go through a series of six steps:

| |One reason corporations sell corporate bonds is to help finance their ongoing business activities. |

A debt asset in which an investor lends funds to an entity, firm or government that have a loan of funds for a defined period at a fixed interest rate. Bonds are used by firms municipalities, states, and United States and foreign government to finance a diversity of projects and activities, bonds are commonly referred to as fixed income.

WorldCom has the option to extend its bank loan credit facility or to issue this large $6 billion in debt. It plans to use the rolling commercial paper program to pay British Telecommunications for MCI’s share purchases, and then use bond proceeds to pay off the commercial paper program. This signals that WorldCom does not need the money immediately for a single corporate purpose, and does not need the money immediately. Therefore, perhaps it makes sense for WorldCom to issue the bonds in smaller installments rather than flooding the market with $6 billion in debt all at once. The first reason for this is that, if an underwriter must first purchase the bonds before selling to investors, an underwriter may demand greater spread in order to justify taking down an entire $6 billion in debt using the bank’s capital assets. The second

Bond’s with collateral will have lower coupon rate as bondholders have claim on collateral no matter what. It provides an asset which lowers default risk. Downside to company is that this collateral cannot be sold as an asset and needs to maintain it.

The preferred stock is differed from common stock when a company goes bankrupt, preferred stockholders enjoy priority distribution of the company's assets, while holders of common stock don't receive corporate assets unless all preferred stockholders have been compensated (bond investors take priority over both common and preferred stockholders). Meanwhile, the preferred stock is differed from corporate bonds because they are vary in price for different reasons. If company earnings grow, the stock is almost certain to rise over time. The price of bonds depends on the prevailing interest rates. If interest rates rise, a bond becomes less attractive because it pays a fixed rate and the price will fall. Conversely, if interest rates fall, the bond price is likely to rise. Bonds are rated based on risk (how likely it is the issuer will be able to repay the bond at maturity). A

It provides an evaluation of the bond issuer’s financial strength and ability to pay back the bond’s principle and interest. The bond rating also provides investors with some sense of security when investing in a particular firm. A higher bond rating implies a lower likelihood for the firm to default. Investors would feel more secured investing in such a bond, thus demanding a relatively lower rate of return. As such, high rated bonds enable the issuer to enjoy a lower cost of borrowing. A lower bond rating, on the other hand, serves as a negative signal to investors on the firm’s ability to repay debt obligations.

In the first part of our report, we investigate if a 35 basis points yield spread represents mispricing of two bonds, both with the same maturity but one with a coupon rate of 10.625% and the other 4.25%. Our investigation also determines if the yield spread represents an arbitrage opportunity. In our investigation, we calculate the theoretical yield spread between the two bonds and compare the figure with the observed yield spread. It is cited in the case that the observed yield spread could be due to different liquidity premium for each bond or simply due to different durations. Through our calculations, we discover

While many investors are generally familiar with municipal bonds, in reality the municipal bond market is complex and much different than any other market. This is because the market is very fragmented. There are over one million individual bonds outstanding, from 55,000 different issuers, that comprise this $3.7 trillion market. Contrast one million different municipal bonds with the fact that in the U. S. stock market we have roughly 5-6,000 stocks.

As stated in the beginning, a bond is considered as a loan from the investor. Therefore if a person bought a bond such as corporate bonds from a bond issuer, he or she does not have any ownership in the company with no direct control over the business. It will be just limited to lending and borrowing.

When an organization issues a bond, it makes a commitment to you (investor) that it will make regular (quarterly, biannually, or yearly) payment of the interest at a specified rate on the total amount it borrowed from you (face amount) until the maturity date of the bond when it will repay the principal. This simply means that when you invest in bonds you start earning interest regularly until the maturity date of the bond when the issuer of the bond pays back the principle (money borrowed). Because of the facts that you get paid interest regularly and the principle upon the maturity of the bond, this investment instrument is often termed as a fixed income security.

The last consideration of issuing the debt is markup of different currencies. The markup equals to the difference between the bond’s issuing coupon rates and inter-bank interest rates of 10-year bond of four currencies. The calculation has shown that British pounds has the lowest markup among other three currencies. (See Exhibit 3) This 0.001% markup would greatly reduce default rate of the debt and make the debt more secured, also attracts more investors.

Chapter 1 Introduction to Corporate Finance ..................................................................... 2 Chapter 2 Accounting Statements and Cash Flow.............................................................. 3 Chapter 3 Financial Markets and NPV: First Principles of Finance................................... 6 Chapter 4 Net Present Value............................................................................................... 6 Chapter 5 How to Value Bonds and Stocks........................................................................ 7 Chapter 6 Some Alternative Investment

Role of SEBI – Pre-issue and Post-issue requirements & Conditions to be fulfilled by the Issuer Company:

Credit stock and debentures are the key type of long-term finance that is utilised by various associations to satisfy the prerequisite of assets suitably. In addition, advance stock is regularly isolated into diverse units rather as offer capital, and investors are asked for to purchase the quantity of units they require. Besides, the credit stock may be convertible or irredeemable and these stocks of different firms are exchange and their recorded worth will upsurge as indicated by the likelihood of the business, exercises in interest rate (Rigby, 2011).