Fairway Bond
The goal of any good tee shot is to keep it on the fairway; we want to keep it between the rough sections, and on course toward its goal.
Fairway bonds kind of operate on the same premise. A fairway bond is a special little bond that is attached to a floating interest rate. What this means is that people who own them can make extra coin on them as long as that interest rate stays within a certain range between the date that they buy it and the date that the bond matures.
These bonds are a pretty good deal for the more conservative investing crowd out there. Worst case scenario, the interest rate doesn’t stay in its specified range (i.e., on the fairway), and when the bond matures, all you get is your money back. Boo. Best case scenario, if you buy one of these puppies because you think the interest rate is going to rise into your specified range, and then it does, you can make a pretty penny on your investment and get the value of the bond itself back when it matures. And then you don't have to throw your club into a tree.
Related or Semi-related Video
Finance: What is a story bond?7 Views
Finance allah shmoop What is a story bond Well once
upon a time there was a castle alone in the
kingdom of yield The princess wanted to pay on ly
five percent a year to rent that money She had
found just the right castle she wanted to buy She'd
been cutting her hair for decades and selling it on
c baii you know for the down payment But then
one day a socialist ogre came by and took all
of her money her belongings and her pink unicorn and
gave it all to the union elves So then the
troll family who had loaned her the castle loans grew
very nervous about her collecting the debts she owed them
Especially now that the socialist ogre had taken over her
castle and was kind of ruining it with the elves
partying down way too hard Well the troll family bonds
were backed by the value of the castle And the
family knew that even if the castle were completely ruined
by the trolls and the ogre and it turned to
rubble while the lands around it were worth five times
the bonds principle so is the bonds trading value had
come down from its thousand dollars a unit par value
to being offered it now only six hundred bucks investors
who realised the great value of the pink unicorn breeding
grounds around the castle wanted toe by that bond aggressively
at these prices Well the brokers who wanted to sell
the bond and make their nice commissions were only too
happy to tell and retail this complex story And in
fact this is the chances of a story bond that
is There is some explanation as to why the bond
is trading at some weird meaningful discount or premium toe
where it was originally offered or trading that is not
explainable by normal market conditions like fed fund rates changing
or inflation moving around or other broad based global debt
phenomena that would raise or lower the tides bringing up
or down all votes This is a story bond It
has its own unique story that has to be told
and retold like the bible again and again it's a
bond that has such a complicated random bizarre history behind
it that investors need tohave an endlessly long painful story
like this one told to them before they feel comfortable
Enough to risk their money on that bond And still
you know be able to sleep at night because well 00:02:22.805 --> [endTime] you know who doesn't love a good bedtime story
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