Bonds
Municipal Bonds
Tax Exempt Municipal bonds are among the most popular types
of investments available today and with good reason. They offer a wide range
of benefits including:
- Attractive current income free from federal, and in some
cases, free from state and local taxes.
- High degree of safety with regard to the payment of interest
and repayment of principal based on the issuing municipality's financial stability.
Corporate Bonds
- Corporate bonds are debt securities. They are issued by
corporations that need to raise money for working capital or for capital expenditures
such as plant construction, equipment purchases, expansion, etc., and are
commonly referred to as a funded debt.
- Unlike stockholders, corporate bondholders do not have ownership
interest in the issuing corporation or a voice in management. In return for
their investment, bondholders receive the corporation's promise to repay principal
and interest on the debt. As creditors of the corporation, bondholders receive
preferential treatment over common and preferred stockholders in certain instances.
When a corporation files for bankruptcy, the claims of creditors (including
bondholders) are settled before the claims of stockholders. For this reason,
bonds are sometimes called senior securities.
- Par value of a corporate bond is usually $1,000. Issues
of less than $1,000 are referred to as baby bonds and are not popular with
investors because they tend to be less marketable.