High-yield bonds are bonds that have relatively high interest rates in exchange for having greater risk attached. Basically, because high-yield bonds have less security, the organizations that offer them attach higher interest rates as an incentive to buy. High-yield bonds are often called “junk bonds.” Bonds are classified as “junk” when they have a risk rating of Ba, BB, or lower.
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High-Yield Bonds are…
Wednesday, August 5th, 2009An Issue is…
Wednesday, August 5th, 2009An issue is a financial asset that an issuer sells to raise money for itself. For example, a company is an issuer when it sells stocks and the stocks are the issue. A country can also issue bonds to raise money – to issue securities, like stocks or bonds, means to put them on the market for sale.
Preferred Stock is…
Wednesday, August 5th, 2009A Partnership is…
Wednesday, August 5th, 2009A partnership is a group of at least two people who agree to share the profits and risks involved in running a business.
The Federal Reserve is…
Wednesday, August 5th, 2009The Federal Reserve (or “the Fed”) is the government agency that sets monetary policy, which means they try to control inflation and affect people’s spending habits by changing interest rates. The Fed also controls the discount rate, which is an interest rate that makes it cheaper or more expensive for banks to borrow and lend money.
An Exchange is…
Wednesday, August 5th, 2009An exchange is any marketplace with established rules and regulations where you can buy and sell one or more types of commodities (stocks, bonds, options and futures, etc.).
Duration is…
Wednesday, August 5th, 2009Duration is a measurement of how sensitive the price of a bond is to changes in interest rate. A bond with a higher duration would change in price more than a bond with lower duration given the same change in interest rate. The higher the duration, the more you can either gain or lose on the market price of the bond – depending on whether the interest rate increases or decreases.
A Dealer is…
Wednesday, August 5th, 2009A dealer is a person or entity that buys and sells goods and keeps an inventory. In an investment capacity, a dealer buys and sells securities on his own behalf, rather than as a representative for someone else.