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Bond Interview Questions & Answers - Learning Mode

Bond Interview Questions & Answers - Learning Mode

A bond is a debt investment in which an investor loans money to an entity (typically corporate or governmental) which borrows the funds for a defined period of time at a variable or fixed interest rate. A bond, also known as a fixed-income security, is a debt instrument created for the purpose of raising capital. They are essentially loan agreements between the bond issuer and an investor, in which the bond issuer is obligated to pay a specified amount of money at specified future dates. Bond is a debt instrument issued for a period of more than one year with the purpose of raising capital by borrowing. The Federal government, states, cities, corporations, and many other types of institutions sell bonds. Generally, a bond is a promise to repay the principal along with interest (coupons) on a specified date (maturity). Some bonds do not pay interest, but all bonds require a repayment of principal. When an investor buys a bond, he/she becomes a creditor of the issuer. However, the bu

Try Bond Interview Questions & Answers - Exam Mode

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Bond Interview Questions & Answers - Learning Mode
Try Bond Interview Questions & Answers - Exam Mode
Question: Who can offer these long term Infrastructure Bonds?

Answer: The entities like LIC, IDFC, IFCI and other NBFCs which are classified as Infrastructure Finance Companies by RBI shall be allowed to issue these long term infrastructure bonds. Source:
Question: What is Non Convertible Debentures (NCD)?

Answer: Nonconvertible debentures are unsecured bonds that cannot be converted to company equity or stock. Nonconvertible debentures usually have higher interest rates than convertible debentures. A fixed deposit is an arrangement with a bank where a depositor places money in the bank and is paid a regular fixed profit.

Debentures are long-term financial instruments which acknowledge a debt obligation towards the issuer. Some debentures have a feature of convertibility into shares after a certain Source:
Question: Do we require a DEMAT account for investing in NCDs?

Answer: Yes, because all the recent issues of NCDs were compulsorily in the dematerialized form. Source:
Question: How will i get my interest on the due date?

Answer: The interest shall be credited to the respective Bank account registered with the demat account through ECS on the due date for interest payment, and -if the due date is a public holiday then the next working date. Source:
Question: Who are the eligible investors for Bonds?

Answer: Only Resident Indian individuals (Major) and HUF can invest in these bonds. Source:
Question: Are these infrastructure bonds tax free?

Answer: No, the interest received in these bonds is not tax free. The investor is liable to pay tax on the interest received. Source:
Question: What is the tenure & lock-in period of these tax free Infrastructure Bonds?

Answer: The Tenure of these bonds shall be 10 years and the bonds have a lock-in of 5 years. Source:
Question: What would happen if I apply amount more than Rs. 20,000/-?

Answer: The allotment shall be made for the sum applied, however the benefit under section 80CCF may only be availed for a maximum sum of Rs. 20,000/-. Source:
Question: Is PAN also mandatory while investing in NCD?

Answer: Yes, quoting PAN number in the NCD application form is compulsory irrespective of the amount involved as per SEBI guidelines. Source:
Question: Who would get the interest in case of the joint application of bonds?

Answer: In case of joint application the interest shall be paid to the account of the first applicant only. Source:
Question: What's the difference between NCDs & FDs?

Answer: Following are the differences between an NCD and an FD:

i) Liquidity: In contrast to a NCD, FD can't be sold in the market. As NCDs are listed on a stock exchange, you can sell them any time you want. However, bank FDs are also highly liquid and can be encashed before maturity with minor penal charges.

ii) Safety: While NCDs are secured debt, corporate FDs are altogether unsecured and bank FDs are secured to the extent of Rs one lakh only.

iii) Taxation: There is differe Source:
Question: Can a minor apply for subscription to these bonds?

Answer: A minor is not eligible to apply for subscription to these bonds. Source:
Question: Can I redeem my FD before the original term?

Answer: Yes, FD can be closed before the original term of the FD. In the event of the Fixed Deposit being closed before completing the original term of the deposit, interest will be paid at the rate applicable on the date of deposit, for the period for which the deposit has remained with the Bank. In case of premature withdrawal the deposit may be subject to penal rate of interest as prescribed by the Bank on the date of deposit. Source:
Question: What are different type of Bonds based on their issuers?

Answer: Different type of Bonds based on their issuers are:-
1. Corporate Bonds .
2. Convertible Bonds.
3. Callable Bonds.
4. Term Bonds.
5. Amortized Bonds.
6. Adjustment Bonds.
7. Junk Bonds.
8. Angel Bonds.

Question: What is a Junk Bond?

Answer: A junk bond, also known as a "high-yield bond" or "speculative bond," is a bond rated "BB" or lower because of its high default risk. Junk bonds typically offer interest rates three to four percentage points higher than safer government issues. Source:
Question: What is a Callable Bond?

Answer: Callable bonds, also known as "redeemable bonds," can be redeemed by the issuer prior to maturity. Usually a premium is paid to the bond owner when the bond is called.

The main cause of a call is a decline in interest rates. If interest rates have declined since a company first issued the bonds, it will likely want to refinance this debt at a lower rate. In this case, the company will call its current bonds and reissue new, lower-interest bonds to save money. Source:
Question: Can I apply in joint names?

Answer: Yes application can be made in joint names with a maximum of three applicants, however the demat account shall also be held in the joint names and order of applicant shall be the same as appearing in the demat account. In case of application made in joint names, the tax benefit shall only be availed by the first applicant. Source:
Question: What is a Amortized Bond?

Answer: An amortized bond is a financial certificate that has been reduced in value for records on accounting statements. An amortized bond is treated as an asset, with the discount amount being amortized to interest expense over the life of the bond. If a bond is issued at a discount - that is, offered for sale below its par (face value) - the discount must either be treated as an expense or amortized as an asset.

Amortization is an accounting method that gradually and systematically reduces the Source:
Question: What is the maximum amount for which the benefit u/s 80CCF be availed?

Answer: Maximum benefit to an investor shall be Rs. 20,000/- under section 80CCF of the Income Tax Act, 1961. Source:
Question: Is investing in NCDs better than parking funds in corporate and Bank FDs?

Answer: NCDs vs. Corporate fixed deposits: Yes, of course NCDs are better than company FDs. Though usually the interest rates on NCDs and company FDs are more or less the same, what tilts the balance in favour of NCDs is the risk-return factor. Furthermore, there is also potential to earn capital appreciation from NCDs if there is a downward movement in the interest rates.

NCDs vs. Bank fixed deposits: Again, NCD is better than a bank FD because the interest differential is quite significant whic Source:

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Latest 20 Questions
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