A debt tender offer is a public request to a company’s bondholders to sell back their bonds or debt instruments at a given price and within a specific timeframe. When interest rates fall, companies will consider a debt tender offer since it is cheaper to borrow than to keep older bonds with higher fixed coupons. […]

Companies have a sinking fund for bond issues, which is money set aside or saved to pay off a debt or bond. Bonds issued by sinking funds are less risky because they are backed by the fund’s collateral and so have lower yields. Paying off debt early with a sinking fund saves money on interest

Stocks provide ownership of a company as well as a share of any cash dividends (‘Dividends’). Bonds allow you to participate in lending to a business but do not give you ownership. Instead, the buyer of a Bond receives periodic payments of Interest and Principal. What is the distinction between stocks and bonds? Stocks and

Stocks outperform bonds in the long run. According to investment research firm Morningstar, major stocks have returned an average of 10% per year since 1926, while long-term government bonds have returned between 5% and 6%. Is a 6% rate of return acceptable? The answer to such question is highly dependent on current events. However, a

The rule of thumb that advisors have typically recommended investors to employ in terms of the percentage of stocks an investor should have in their portfolio; for example, a 30-year-old should have 70% in stocks and 30% in bonds, while a 60-year-old should have 40% in stocks and 60% in bonds. What should my investing

Fixed-rate savings bonds are interest-paying savings accounts offered for a set period of time by banks and building societies. Instant access savings accounts normally provide a lower interest rate than regular savings accounts. Is it possible to lose money on a fixed-rate bond? No, as long as you don’t take your money out before it

Callable bonds have an inbuilt option as well, although it is not the same as a convertible bond’s. A callable bond is one that the firm can “call” back before it matures. Assume a corporation has borrowed $1 million by issuing bonds with a 10% coupon and a ten-year maturity. If interest rates fall (or

Savings Bonds are popular among investors because they are low-risk and help the federal government. United States Savings Bonds are a government-backed way to invest money. Unfortunately, the bonds pay little interest and can’t be cashed in for a long time without losing money. United States Savings Bonds, on the other hand, are not subject

Face value (par value) refers to the amount paid to a bondholder at the maturity date, assuming the bond issuer does not default. Bonds sold on the secondary market, on the other hand, vary with interest rates. If interest rates are higher than the coupon rate on a bond, for example, the bond is offered

The coupon rate is the annual yield on a bond that an investor can anticipate to receive while keeping it. It is computed by dividing the sum of the annual coupon payments by the par value when the bond is issued. A bond’s yield to maturity and coupon rate are the same at the moment