Perpetual-floating rate bonds-index and linked bonds, Financial Management

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Explain the following term:

Perpetual bonds, Floating rate bonds, Index-linked bonds and Callable bonds.

Perpetual bonds (also termed as consols) are never mature. This simply pays coupons of a specific amount forever. Floating rate bonds comprise coupon rates that vary over the bond’s lifetime. Usually, the floating coupon rate is set at a premium over any market interest rate (for example like LIBOR or the US T-bill rate) and is reset onto a pre-specific basis. For index-linked bonds, coupons and principal are produce in line along with inflation (into the relevant country). First matter in the UK, they are now gradually more often issued by governments. Callable bonds can be repaid untimely (which is before maturity) by the issuer when he/she so decides. Early repayment might be limited to a particular date (European) or may be permitted at any time prior to maturity (American).


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