Tax-exempt bonds issued by or on behalf of local or state government for the purpose of providing special financing benefits for qualified projects. The financing is most often for projects of a private user, and the government generally does not pledge its credit. |||These bonds are used to attract private investment for projects that have some public benefit. (There are strict rules as to which projects qualify.) This type of a bond results in reduced financing costs because of the exception of federal tax.
1. The amount borrowed or the amount still owed on a loan, separate from interest. 2. The original amount invested, separate from earnings.3. The face value of a bond.4. The owner of a private company.5. The main party to a transaction, acting as either a buyer or seller for his/her own account and risk. |||Be sure to take into account the context in which this term is used, as the exact meaning of the term has many variations. Also referred to as "corpus".
A fixed-income security that guarantees a minimum return equal to the investor's initial investment (the principal amount). Also known as "principal-protected products" and "principal-protected securities." |||These investments are tailored for risk averse investors wishing to protect their investments while participating in gains from favorable market movements.
A feature of a convertible issue that allows the issuer to call the issue during the non-call period if the stock reaches a certain price. |||For example, a convertible bond may allow a provisional call if the underlying common stock trades at 150% of the conversion price for 30 consecutive days.
A sizeable decline in interest rates that may trigger or cause companies to call in bonds that otherwise pay high coupon or interest rates. Because these bonds are being called before their initial expiration date, theoretically, bondholders can expect to receive a premium or additional sum for their securities. |||As an example, if a company that issues bonds containing a coupon or interest rate of 12% was to see the prevailing interest rate to drop to 7%, it may exercise its option to "call", or buy back these bonds from the debt holders, enabling the company to borrow money at a much lower rate than when the security was first issued. The company, however, must pay bondholders a premium, or an additional amount over and above the bond’s par value in order to repurchase the debt. The fluctuation in interest rates acted as the trigger for such an action.
A type of interest rate risk which asserts that the characteristics of interest rate fluctuation are variable (as opposed to constant) over a period of time. Although interest rates are expected to fluctuate over the period of an investment, the probability of an interest rate change is not always constant, nor is the magnitude of the volatility of interest rate changes. |||Generally speaking, it is impossible to predict with certainty the characteristics of a changing variable such as interests rates into the future. While it is possible to make reasonably accurate predictions, some amount of uncertainty still exits. This uncertainty represents a tangible risk, which must be incorporated into the price of an investment vehicle.
Refers to a series EE savings bond which has been issued after December 1989 and purchased by an individual at least 24 years of age. |||The interest from this type of bond is tax-free if you redeem it to pay for a higher education expense.
A condition that allows a bondholder to resell a bond back to the issuer at a price - which is generally par - on certain stipulated dates prior to maturity. The put provision is an added degree of security for the bondholder, since it establishes a floor price for the bond. This mitigates the risk of a decline in the bond price in the event of adverse developments such as rising interest rates or a deterioration in the credit quality of the bond issuer. |||Since a put provision gives the bondholder the right but not the obligation to sell or "put" the bond to the issuer, it is akin to the sale of a put option by the bond issuer to the bondholder. As a result, a bond with a put provision will generally be priced higher than a comparable bond without a put provision.
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