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Muni Bonds Videos 71 videos

Finance: What is maturity?
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Maturity is, quite simply, the date when a debt becomes due. As for our maturity, well... we're still giggling about the word "due."

Finance: What are Freddie Mac and Fannie Mae (FNMA)?
21 Views

What are Freddie Mac and Fannie Mae? They sound like snack cakes to us, so, uh...maybe we should watch this video.

Finance: What are Bond Anticipation Notes, Revenue Anticipation Bonds, and Tax Anticipation Notes?
26 Views

What are Bond Anticipation Notes (BANS), Revenue Anticipation Notes (RANS), and Tax Anticipation Notes (TANS)? BANS, RANS and TANS are all short-te...

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Finance: What are the Major Classes of Bonds? 8 Views


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What are the Major Classes of Bonds? Insofar as US dollar denominated bonds go, the primary classes of bonds are: 1) US Treasury Bonds; 2) US Treasury Notes and other US government debt; 3) Investment Grade Corporate Bonds (BBB- or higher); 4) High Yield (aka Junk) bonds (CCC+ or lower); 5) Mortgage Bonds, 6) Sovereign Bonds of other countries; 7) Municipal Bonds (issued by states, cities, and other municipalities). Non-US dollar bonds may incorporate combinations of the above as well as intangibles and assets not recognized under US GAAP accounting rules.

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Transcript

00:00

Finance a la shmoop what are the major classes of bonds? well there's world

00:08

history advanced trig intro to growing a moustache but of course that's just for [Books appear on table]

00:14

college bound bonds who are trying to impress the top tier universities well

00:18

in terms of bond classes in the real world there are so many flavors to

00:23

choose from first we've got senior obligation bonds [Man walking in street and senior obligation bond appears]

00:26

and these guys aren't cranky or gray-haired they are the first type of

00:30

bonds that a company would have to pay if they went bankrupt they're often

00:33

considered the most secure types of bonds for just that reason so they pay [Senior obligation bond stamped with most secure]

00:37

less interest then there are junior obligation bonds which are slightly less

00:42

secure than senior bonds so they've paid a little bit more rent on the money if a

00:47

company declares bankruptcy the juniors are paid after the seniors duh...

00:50

sophomores, freshmen get behind them asset-backed bonds are a different thing

00:55

and they're backed by the assets a company has for example an airline might [Plane landing on runway]

01:00

guarantee its bonds via the airplanes it owns if it owns them all right moving on

01:05

then we have debentures which are backed only by the creditworthiness of the

01:09

company so basically the company is just handing you an IOU and promising to pay [People shaking hands]

01:14

you back with a handshake trust us yeah sure so debentures have to pay

01:18

even more interest and if the company messes up and can't pay you back well

01:22

too bad cupcake the only comfort you would have in that situation is that the

01:26

company's credit would be wrecked forever if they couldn't pay their [Miley Cyrus swinging on wrecking ball]

01:30

debentures or other forms of bonds at the end of the CEOs career and pretty

01:34

much all the management and so on so they would really hate to go bankrupt yet

01:37

with the debenture yeah and that that all might be cold comfort to you though

01:41

especially if your investments were the ones wiped out by them not paying their [Woman appears at office desk]

01:45

debentures and well then you can't pay your utility bill all right moving on

01:49

convertible bonds like their name suggests can be converted usually into

01:55

common stock at a given price to the given time period you can make a tidy

01:59

profit converting bonds into stocks if a company suddenly starts to do well and

02:03

stock prices really increase like we had $1,000 per bond convertible into 20 [1,000 dollar par bond appears]

02:08

shares of stock well when the stocks only at 10 bucks that's not

02:12

very attractive but if that stock went to $50 it'd be like break-even if I went

02:17

to $100 while the bond converts and you'd double your money there...

02:20

all right well finally there are zero

02:23

coupon bonds which don't pay you anything until the very end you buy them

02:28

at a big discount like six hundred twelve dollars and then they pay par

02:32

a thousand dollars like ten years later once they reach maturity they pay back

02:36

what you invested plus all the interest that is built up in one chunk... think

02:41

high school dating the problem is that some companies have a hard time paying [Man stood beside vault of cash]

02:45

back all these payments at once and you get no interest payment along the way

02:50

with a zero coupon bond so they tend to pay even more interest which is good for

02:54

the person lending the money assuming that they actually get paid back their [Interest money transfers from borrower to lender]

02:58

interest in principal at the end of the zero coupon right well some company set

03:02

up special funds like bond sinking fund equivalents so that well they have [Cash falling]

03:06

enough money at the end to pay back their bonds once those bonds reach maturity

03:11

unlike the writers here at Shmoop you know the maturity thing will never

03:14

happen [Shmoop worker using PC]

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