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. The preferred owner has a higher priority of claim on the firm s assets than the common stockholder does in the event of corporate bankruptcy. The individual investor is not entitled to tax breaks that corporations have for owning preferred stock. Mutual funds and unit trusts are alternative options. Funds and trusts may confer additional benefits, such as lower minimum investment levels, diversification, and tax protection.