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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: 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: 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 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: 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: Can I get loan on these bonds?

Answer: You cannot avail of any loan pledging these bonds in the first 5 years. Thereafter, these bonds may be pledged to avail of loans. Source:
Question: What is a Convertible Bond?

Answer: A convertible bond may be redeemed for a predetermined amount of the company's equity at certain times during its life, usually at the discretion of the bondholder. Convertibles are sometimes called "CVs."

Issuing convertible bonds is one way for a company to minimize negative investor interpretation of its corporate actions. For example, if an already public company chooses to issue stock, the market usually interprets this as a sign that the company's share price is somewhat ove 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: What is a Adjustment Bond?

Answer: Issued by a corporation during a restructuring phase, an adjustment bond is given to the bondholders of an outstanding bond issue prior to the restructuring. The debt obligation is consolidated and transferred from the outstanding bond issue to the adjustment bond. This process is effectively a recapitalization of the company's outstanding debt obligations, which is accomplished by adjusting the terms (such as interest rates and lengths to maturity) to increase the likelihood that the compan 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: 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: Will TDS be deducted on these bonds?

Answer: No TDS shall be deducted on the interest received as these bonds are issued Compulsorily in demat mode and shall be listed on NSE & BSE. 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 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 is the benefit of investing in tax saving Infrastructure Bonds if they offer the same tax benefit?

Answer: The tax exemption benefit under Sec 80CCF on a sum of Rs. 20,000/- is over and above Rs. 1,00,000/- benefit under section 80C, 80CCC and 80CCD. 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 NRIs invest in NCDs?

Answer: Yes, NRIs can invest in NCDs provided the company issuing NCDs allows them to invest in it. 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: 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 to purchase NCDs?

Answer: Companies will commence the public issue of NCDs for a specified period of time. After that the NCDs are listed on the stock exchange. Investors who are interested in investing in the NCDs can purchase the NCDs from the open market through registered brokers. Source:

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