There are several kinds of corporate bonds, giving investors many options when it comes to a bond’s structure, yield, and credit quality. Here are the most common:
• Fixed-rate coupon bonds pay coupons on a fixed, regular basis, usually twice a year. The payment amount is a percentage of the bond’s par value.
• Zero coupon bonds do not offer coupons. These bonds are issued at a discounted price compared to its face value, so the bondholder receives a profit upon maturity.
• Asset-backed bonds, such as collateralized debt obligations (CDOs), allow investors to claim a company’s underlying assets in case it defaults.
• Convertible bonds can actually be exchanged for shares of company stock, although that also makes them vulnerable to market volatility.
• Callable and puttable bonds can be “called” by the issuer before their maturity, and either redeemed at par value or a percentage thereof. With puttable bonds, the investor can “put” the bonds back into the hands of the issuer and receive par value.
NYC Journals 