Bonds represent debt issued by governments or companies and sold to investors. Generally, bonds pay interest payments and return the full loan principal at a specified date called maturity. Bond prices vary inversely with interest rates, falling when rates rise and rising when rates fall.
Investing in bonds provides income and diversification to your portfolio. There are a variety of types of bonds including zero-coupon bonds, floating rate bonds and those that allow you to convert your bond to shares of the issuer’s stock.
Covalent bonding occurs when nonmetallic atoms share electron pairs. It produces polar covalent bonds when the shared electrons are unequally distributed and nonpolar ones when they are evenly divide. The type of bonding is determined by the relative atomic positions of the participating atoms in relation to each other in the periodic table. Bonds between elements that are closer together in the table tend to be covalent; those between a metal and a nonmetal are usually ionic.
Covalent bonds are most common in molecules and liquids with low boiling and melting points (such as ethanol and solid CO2). They are not strong enough to conduct electricity, but they do exhibit modest forces of attraction between atoms.
Irving Langmuir introduced the term “covalence” in 1919 in an essay published in the Journal of the American Chemical Society. Gilbert N. Lewis established the idea of electron exchange in compounds a few years earlier in 1916.
The number of electrons that a molecule requires to become stable is called its valence electron count or electron configuration. Atoms share or lose electrons to satisfy this requirement, which is known as the Octet Rule. This rule states that each atom in a molecule must have eight valence electrons to become as stable as the noble gases. In a covalent bond, the atoms sharing the electrons are called bonded atoms and are marked with a dash in a Lewis structure. The polarity of the bond is determined by the difference in electronegativity between the two atoms, with the more electronegative atom having a partial negative charge.
What does a contractor’s bond cover in California?
A contractor’s bond is a type of insurance coverage that protects clients from any losses or damages caused by the contractors’ actions. In California, a contractor’s bond is required before a contractor can obtain a license to work in the state. The bond is designed to protect clients from financial loss due to the non-performance of contractual obligations.
The amount of bonds varies depending on the project cost and ranges between $12,500 for general contractors and $15,000 for specialty contractors. A contractor’s bond covers various aspects such as payment for labor and materials, compliance with building codes and permits, completion of work within specified timelines, and adherence to safety standards on job sites.
In short, a contractor’s bond in California provides protection against fraud or misconduct by contractors while working on projects construction bonds in California. This gives clients peace of mind knowing that they are covered in case something goes wrong during construction or renovations.
Ionic bonds are one of the two most common types of chemical bonding. They form when atoms of different elements exchange electrons to give rise to oppositely charged ions. Ionic bonds are produced by the transfer of valence electrons between atoms of dissimilar elements, typically metals and non-metals. In an ionic bond the atom that loses electrons becomes positively charged (cation) while the atom that gains electrons becomes negatively charged (anion). The electrostatic attraction between the ions produces the strong bond that holds the compound together.
Ionic bonding only forms when the atoms involved have enough electrons to achieve their octet configurations. Carbon, for example, does not form ionic bonds because it has only four valence electrons, half of its octet. However, it can form covalent bonds with atoms that have more than four valence electrons because it has a low ionization potential and therefore does not easily donate its electrons.
A complete ionic bond requires that all of the valence electrons be transferred between atoms and that both atoms become positively or negatively charged. This is why ionic compounds are always solids and not liquids or gases. Moreover, the formation of ionic bonds also causes the ions to bind in a regular 3D structure called an ionic lattice. An example is the solid sodium chloride in which each sodium ion is surrounded by six chlorine ions.
A convertible bond is a hybrid securities product that pays fixed-income interest payments but also has the ability to be converted into a specified number of common shares or equity shares at specific points in the bond’s life. The conversion feature offers companies growth potential, while investors are offered an attractive income stream and the opportunity to benefit from rising stock prices.
Because of the added element of stock options, convertible bonds tend to be more sensitive to broader market movements and are less stable than plain corporate bonds. They are also sensitive to rising interest rates although to a lesser degree than other types of bonds. If many bondholders exercise the conversion option, dilution may occur and negatively affect the company’s stock price.
The most common type of convertible is the “plain vanilla” structure that grants holders the right to convert into shares at a predetermined rate and price at maturity. Other structures include mandatory convertibles, which are required to be exchanged into shares at a specific point in time or reversible convertibles that allow the company to buy the bonds back at par value at any time before the bond’s maturity date.
Investing in individual convertible bonds requires a good deal of research. However, investors can access convertibles through mutual funds or exchange-traded funds (ETFs) that offer these investments.
Types of Bonds
Bonds are sold by governments and companies to raise money. They provide investors with a guaranteed return of their principal, known as the face value, and a stream of interest payments until the bond’s maturity date. There are many types of bonds that can be purchased, with features that help with tax planning, inflation hedging and other investment goals.
Bond prices move inversely to interest rates, meaning that they trade at a discount when interest rates are rising and at a premium when interest rates are falling. The price of a bond can also be affected by inflation and political events.
Most bonds are backed by assets like cash or real estate. However, some bonds are not backed by assets and are therefore considered riskier by investors. These are called junk bonds and tend to pay much lower interest rates than investment grade corporate bonds.
Investors can purchase individual bonds from a variety of sources, including banks and brokerage firms. Most bonds are traded through electronic markets, although some require a broker to call the bond desk in order to buy or sell a bond. Investors can also invest in bond exchange-traded funds (ETFs) that track the performance of different classes of bonds and make payouts based on those returns. There are also options and futures contracts that give buyers the right, but not the obligation, to trade a bond in the future at a specified price.