Posted in Finance, Accounting and Economics Terms, Total Reads: 745
Definition: Income Bond
An income bond is a financial instrument in which the issuer has no obligation to make any coupon payments to the investor. The coupon payments are made only when the issuing firm has been able to make enough earnings.
Hence, in such a debt security, only the face value of the bond is to be repaid.
Such an instrument is advantageous to the issuing firm as it can help avoid bankruptcy during difficult financial environment and help in raising capital too, whereas it is disadvantageous to the investor since there is no guarantee of receiving any coupon payments that is extra amount over the face value of the bond.