Ji Young Park 2 1. STAIGHT BONDS 2. FLOATING-RATE NOTES 3. CONVERTIBLE BONDS -FIXED MATURITIES & FIXED RATE OF INTEREST -REPAID BY AMORTIZATION AT THE MATURITY DATE  BY MAKING A SET OF EQUAL PERIODIC PAYMENTS.  BY REDEEMING THE FACE VALUE OF THE BONDS AT MATURITY -UNSECURED, DEBENTURE BONDS -RATE OF RETURN IS ADJUSTED AT REGULAR INTERVALS -ISSUED IN US$ -LIBOR -CONVERTIBLE INTO PARENT COMMON STOCK -CONVERSION PRICE: FIXED ABOVE THE MARKET PRICE -PURCHASING POWER OF MONEY 5 TYPES OF INTERNATIONAL BONDS

Ji Young Park 3 4. BONDS WITH WARRANTS 5. ZERO-COUPON BONDS -ISSUED WITH WARRANTS -WARRANTS: OPTION TO BUY -STATED #, STATED $, DURING PRESCRIBED PERIOD -NO DIVIDENDS, NO VOTING RIGHTS -WORTHLESS AT EXPIRATION -PROVIDE ALL OF THE CASH PAYMENT (INTEREST+PRINCIPAL) -NO PERIODIC INTEREST RATE, SOLD AT A DEEP DISCOUNT -RETURN: FACE VALUE-MARKET PRICE

Ji Young Park 4  DEFINITION  PLAIN ENGLISH EXPLANTION FLOATING-RATE NOTES (FRNs): “Bonds that have a variable coupon-which is adjusted at regular intervals-equal to a money market reference rate, like LIBOR(London Inter-Bank Offered Rate) or Federal Fund Rate, plus a spread.” Your rate of return will keep changing every three or six months with the rate changes in the money market, where a constant rate of return (spread) also exists.

Ji Young Park 5  EXAMPLE -Investor decides to buy a floating-rate note of $1,000  Issued in denominations of $1,000 each -Issuer issues a bond certificate  a margin of ¼ above the LIBOR and adjusted every 6 months  DIAGRAM INVESTORISSUER RATE OF RETURN + $1,000 EACH RATE OF RETURN =LIBOR+25%

Ji Young Park 6  DEFINITION  PLAIN ENGLISH EXPLANTION CONVERTIBLE BONDS: “Bonds that are convertible into parent common stock at a fixed price with a certain premium before the conversion privilege expires.” You have the right to switch your bonds into common stock, issued from the same company anytime within the contracted period.

Ji Young Park 7  EXAMPLE -Investor with a convertible bond decides to convert his/her bond into parent common stock at a conversion price. -The borrowing company is obliged to issue new stock. -Investor can now participate in rising stock prices.  DIAGRAM INVESTORISSUER Conversion Price=Market Price of Bond Issuance Date + Premium

Ji Young Park 8  DEFINITION  PLAIN ENGLISH EXPLANTION BONDS WITH WARRANTS “Bonds with the right to purchase a stated number of common shares at a stated price during a prescribed period, where no dividends and no voting rights exist.” You have an option to buy common shares, where the number, price and time of the shares are predetermined.

Ji Young Park 9  EXAMPLE -A warrant is “EXCERSIED” when Investor buys a stated number of common shares at a stated price (market price + premium) during a prescribed period before expiration date.  DIAGRAM INVESTORISSUER Stated Price=Market Price + Premium Stated # of Shares Issued Worthless at Expiration

Ji Young Park 10 FLOATING –RATE NOTES CONVERTIBLE BONDS BONDS WITH WARRANTS CHARACTERISTICS Rate of Return Changes= Changes in Market Rates Denominations of $1,000 Rate of Return = LIBOR + spread Convertible into common stock at any time b/f expiration Company  Obliged to issue new stock Right to buy common shares Predetermined #’s in Volume, Price & Volume Expiration Date & Premium UPSIDES/DOWNSIDES Little Interest Rate Risk Low Sensitivity Steady Income & Opportunity to Participate in Stock Market Low Interest Rate (1.5~2% below fixed- rate bonds) No Dividends No Voting Rights Restrictions POPULARITY (2003) (* Straight Bonds=75.2%) %3.2%0.1%

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