Page 30 - Introduction To Investment Management

government bonds, corporate bonds, municipal bonds, international bond, convertible
bond, and mortgage bonds from federal agencies.

I) Treasury Bonds

Usually, Treasury bond issued and sold by the government has a maturity period

between 10 to 30 years with a minimum face value of RM1, 000.00 or higher. Investors
will receive a coupon rate once or more in a year. Normally, the government will make

an early call for repayment of the bonds at face or par value, for example 5 years earlier
than the maturity date. With this, the government did not have to pay the coupon rate

for the next 5 years. Since these bonds are issued by the government of a country, then
the risk is relatively lower as compared to other bonds. In order to attract investors,

there is some countries offer tax exemption on income from investments in treasury
bonds.

ii. Corporate Bonds

Issued by private companies or large corporations as a direct source of long-term
financing from the households’ investor. Corporate bonds are riskier as compared to
government bonds. Corporate bonds can be divided into three categories namely:

- secured bonds.
- debentures.
- subordinate debentures.

Secured bond means it has a backup or secured, if the company experienced a

bankruptcy. By the way of explanation, the investors will be protected from any risks of
losses in the company. Meanwhile the debenture holders are not secured, and

subordinate debentures holders have lesser priority over the company’s asset in case of
the liquidation during bankruptcy.

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