Purchase prices are well below face value because of the lack of intermediate payments. A discount bond s single cash payment can provide safety, in addition to locking in interest rates. These features can be a problem if a sale occurs before maturity. An investor should be aware that the discount from face value leads to an imputed annual tax liability. Some zero-coupon bonds are derived from coupon bonds through the process of stripping.
Investors receive many benefits from the existence of Eurobonds.
Prime examples are greater instrument choice and portfolio diversification. A prospective Eurobond investor should address idiosyncratic characteristics, such as taxes and foreign exchange implications, prior to purchase. Therefore, unless investors are very wealthy, closed-end funds offer the only avenue for participation in private placements. Preferred stock is a hybrid of bonds and common stock. The purchase of preferred stock provides the investor with a more stable cash flow than that associated with common stock.