Chapter 11

Bringing on Your Best Bond Bets

In This Chapter

arrow Taking a look at various types of bonds

arrow Exploring fixed- and floating-rate bonds

arrow Understanding bond terminology

arrow Checking out some bond valuation equations

Bonds are popular among both corporations and investors. Corporations appreciate the fact that bonds don’t dilute the value of equity the way issuing additional shares of stock in an initial public offering (IPO) does (each time a company creates and issues brand-new shares, its considered an IPO, as opposed to simply reselling treasury shares). Investors like bonds because they’re less volatile than equity and guarantee nominal returns, although that doesn’t mean they have no risk whatsoever (for more on the subject of risk, see Chapter 14). Still, most bonds have a fixed return, making them particularly attractive for investors seeking stability, such as those who are funding retirement accounts.

In this chapter, you explore the different types of bonds available and their various issuing institutions. You also discover the differences between fixed- and floating-rate ...

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