Five Year Loan Essay

1019 Words 4 Pages
Money, it keeps food on our table and clothes on our backs. Having certain knowledge of how to invest and grow your money can provide a cushion for you and your family. As a business this knowledge is mandatory, they can’t run on promises alone they need money to start up, to keep producing inventory, gaining clients, etc…. Companies are faced with decisions on how they will receive funding and how they get investors to invest in there company. Companies are provided with a few options when it comes to finding the cash needed to have an attempt to be successful.
One option is to take out a loan, taking out loans means signing up for possible interest rates. Loans are provided to businesses based on the value and its ability to repay the loan
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Bonds are IOU loans that grants more risk to the investors than the company selling the bonds. Bonds is the safest option to raising money for your company because the investors are taking the risk. The investors buying the bonds have a sense of comfort knowing they will get a steady income until the fulfilment of the bond. Bonds with the most length tends to pay the most yield. For example a 5 year bond pays a lower yield to a 10 year bond. Investors can purchase bonds from the company directly or from a secondary market in which they can benefit from purchasing a bond below face value offering the investor an instant profit (Bontekoe, n.d.). Investors have to understanding buying a bond is essentially loaning money to a company with the promise from the company to pay back with a fixed interest amounts. Bonds can be paid back annually and semiannually with a specific date that the full payment has to be received. There are three parts of a bonds function, one pat is the face value. How much did the investor pay for the bond? Like I stated earlier depending on where the bond was purchased, directly from the company or a secondary market can cause a price variation. Another part includes the annual interest rate also known as the coupon. How much interest will accumulate with the purchased cooperate bond, and how frequent? The final part of a bond is the maturity date, which Is the date the company will have the bond fully paid

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