Types of Bonds?

(A)    Based on coupon / interest
1.       Fixed rate bonds: -Fixed rate bonds have the coupon that constant throughout the life of the bond.

2.       Floating rate bonds: -These bonds have variable rate of interest. Interest rates are recalculated periodically.

3.       Zero coupon bonds: -No coupons are paid to zero coupon bonds. The bond is issued at discount. On the maturity these bonds are redeemed at par. The difference between acquisition cost of bond and face value of bond is profit to investor.

4.       Deep Discount bonds: -These bonds are similar to zero interest bonds but have huge discount and long period of maturity i.e. 25 years and more. These bonds are not entitled to any interest. The difference between cost and maturity value is profit for the investor.

5.       Inflation-indexed bonds: -The principal amount of bond and the interest payments are indexed in inflation. The principal amount grows and payment of interest increases with the inflation.

(B)    Based on option
1.       Bond with call option (callable bonds: -This feature gives right to issuer, the right to redeem his issue of bonds before maturity of bonds at the predetermined price and date.

2.       Bond with put option (put table bond): -This feature gives bondholder the right to sell their bonds back to issuer at the pre-determined price and date.

(C)    Based on Redemption
1.       Bonds with single redemption: -In this case, principal amount of bond is paid at the time of maturity only.

Amortising Bonds: -In this case, payment is made by borrower on maturity, includes both interest and principal.