Explain different types of bonds in short.

Explain different types of bonds in short. 

Ans. Different types of bonds are explained below: 

(a) Straight Bonds: Straight bonds are bonds which have a fixed periodic coupon over its life and repayment of principal on maturity. 

(b) Zero Coupon Bonds: Those bonds which do not give any regular interest payments are called zero coupon bonds. These are issued at a discount and redeemed at par. 

(c) Floating Rate Bonds: Floating rate bonds pay an interest that are linked to a benchmark rate such as interest rate in treasury bills. 

(d) Bonds with Embedded Options: Bonds with embedded options are the bonds that give an option to convert them into equity shares like debentures. 

(e) Callable Bonds: Callable bonds are the bonds that give the issuer a right to redeem them before maturity on certain conditions. 

(f) Bonds with Put Options: Bonds with put options are the bonds that give the investor a right to prematurely sell them back to issuer on certain terms. 

(g) Commodity Linked Bonds: Commodity linked bonds are the bonds the return on which is dependent on prices of specific commodities in the market.