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Chapter 3

3.4 Bonds

Return  Low (Includes interest and redemption premium)

Risk  Low (e.g. usually secured, fixed coupon rate)

Timescales  Vary from very short term to > 25 years

Liquidity  Good if quoted companies, must wait for redemption if unquoted

3.5 Certificates of deposit (CDs)

Return  Very low

Risk  Very low

Timescales  Typically 3 and 6 months

Liquidity  Can be readily sold on money markets

3.6 Credit agreements (e.g. credit cards, store HP agreements)

Cost  Very high – typically 25–30%

Risk  The credit card company faces the risk of default – unsecured

Timescales  Supposed to be short term

Liquidity  The debt cannot be resold by the lender but the borrower may be
able to repay early if funds permit.

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