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There are many types of bonds.

The following list represents a sampling of the more

common types:

 Collateral trust bond. This bond includes the investment holdings of the issuer as collateral.

 Convertible bond. This bond can be converted into the common stock of the issuer at a
predetermined conversion ratio.

 Debenture. This bond has no collateral associated with it. A variation is the subordinated
debenture, which has junior rights to collateral.

 Deferred interest bond. This bond offers little or no interest at the start of the bond term,
and more interest near the end. The format is useful for businesses currently having little
cash with which to pay interest.

 Guaranteed bond. The payments associated with this bond are guaranteed by a third party,
which can result in a lower effective interest rate for the issuer.

 Income bond. The issuer is only obligated to make interest payments to bond holders if the
issuer or a specific project earns a profit. If the bond terms allow for cumulative interest,
then the unpaid interest will accumulate until such time as there is sufficient income to pay
the amounts owed.

 Mortgage bond. This bond is backed by real estate or equipment owned by the issuer.

 Serial bond. This bond is gradually paid off in each successive year, so the total amount of
debt outstanding is gradually reduced.

 Variable rate bond. The interest rate paid on this bond varies with a baseline indicator,
such as LIBOR.

 Zero coupon bond. No interest is paid on this type of bond. Instead, investors buy the
bonds at large discounts to their face values in order to earn an effective interest rate.

 Zero coupon convertible bond. This variation on the zero coupon bond allows investors to
convert their bond holdings into the common stock of the issuer. This allows investors to
take advantage of a run-up in the price of a company's stock. The conversion option can
increase the price that investors are willing to pay for this type of bond.
Additional features can be added to a bond to make it easier to sell to investors at a higher
price. These features can include:

 Sinking fund. The issuer creates a sinking fund to which cash is periodically added, and
which is used to ensure that bonds are eventually paid off.

 Conversion feature. Bond holders have the option to convert their bonds into the stock of
the issuer at a predetermined conversion ratio.

 Guarantees. The repayment of a bond may be guaranteed by a third party.

The following additional bond features favor the issuer, and so may reduce the price at
which investors are willing to purchase bonds:

 Call feature. The issuer has the right to buy back bonds earlier than the stated maturity

 Subordination. Bond holders are positioned after more senior debt holders to be paid back
from issuer assets in the event of a default.