Bonds as a form of financing is becoming popular. It is a debt security where corporates raise money from investors willing to lend them money for a certain period. Bonds can either be short-term or long-term. A short-term bond matures in less than five years and tends to have low risks. On the other hand, long-term bonds usually have a maturity date of more than five years and are characterized by relatively high risk and higher yields. The issuance of either short- or long-term bonds depends on a company’s financial needs.
The company selected for the analysis is Kroger Company. According to the Morning Star website, Kroger has not issued a short-term bond recently. Therefore, the company does not have an outstanding shortest maturity bond or any information on the maturity rate. However, Kroger has a long-term bond that matures in January of 2050 at a coupon rate of 3.95 percent (“Bond detail – Kroger Co”, 2020). The bond was issued in January of 2020 at an original offering of $750,000 (“Bond detail – Kroger Co”, 2020). It is a long-term bond with a semi-annual repayment plan. The price per offering of the bond is $99.67 with a fixed coupon type (“Bond detail – Kroger Co”, 2020). Currently, the outstanding amount is $750,000, according to the website.
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Credit rating in bonds is used to determine the quality and creditworthiness of a bond. Because bonds carry varying levels of risks, not all bonds have the same credit rating. Some bonds are highly rated, with others having significantly lower creditworthiness. Higher rated bonds are believed to be safer and more reliable forms of investment. Such bonds carry a lower interest rate compared to lower-rated bonds. Kroger’s bond has a Moody’s rating of Baa1 and Standard and Poor’s BBB rating, making it highly rated (“Bond detail – Kroger Co”, 2020). As such, it is a safer form of investment for anyone looking to invest in bonds.
References
Bond detail – Kroger Co. (n.a) Retrieved from http://finra-markets.morningstar.com/BondCenter/BondDetail.jsp?ticker=C873915
