You buy a bond of Nike with your name on it. It sells for $400 and it will pay y

Question

You buy a bond of Nike with your name on it. It sells for $400 and it will pay you your $1,000 in ten years (registered for principal only). What type of bond is this? What is an advantage and disadvantage of this type of bond?

Aaron bought a treasury security that matures in less than a year. What type of security is this? Kenneth bought a treasury security that matures in two years. What type of security is this? Donna bought a treasury security that matures in 30 years-what type of security is this? What are some advantages of the investments mentioned above? Which of these investments would likely pay the highest rate of interest? Describe TIPS-what is the main advantage of these?

Kim owns a bond issued by School to build a new building that will house a new pool and racquetball facilities.It pays 5%. What type of bond is this and what is its main advantage? If Kim is in a 35% tax bracket, what is the taxable equivalent yield for this investment? If this bond is a revenue bond, what does that mean?

Explanation / Answer

1) Bond Type is Principal only Registration ( Bond has to registerd only for principal have the owner's name printed on the bond certificate with coupon attached.
Advantage - The bondholder whose name is printed on bond certificate is entitled to receive principal at the maturity.It is safe in terms of Tax evasion and other fraudulent act.
Disadvantage - The market price of the registered bond is less than the coupon bond of the same issue because inconvience involved in transfering the bonds.

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