Commercial paper is typically sold to financial institutions and mutual funds. Interest is received by clipping the attached coupons as they mature and presenting them for payment. Tax law changes enacted in 1982 effectively prohibit the issuance of such bonds, but preexisting coupon bonds may be purchased in secondary markets. The relationship between the annual interest level of a security and its principal amount. The return from interest payments relative to the current price of the fixed-income security.
Bonds are long-term debt obligations that are secured by specified assets and a promise to pay.
Debentures are similar to bonds but are not collateralized, or secured, by specific assets. Debentures are backed by the overall creditworthiness of the issuer. A term typically used in discussing the impact that a transaction has on a company's earnings per share. For example, when an acquisition is made, the financing costs associated with the acquisition may exceed the profits gained from it, in which case there is a dilution of earnings. A contract to purchase or sell a specific quantity of a commodity, currency, financial instrument, and so forth, at a set price on a stipulated future date.