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Bonds may re­present either the irredeemable or the redeemable debt of a state, or town, or of any industrial or mercantile concern; the irredeemable debt of a state being usually called funded, and the latter its unfunded or floating debt.

The stockholders of an irredeemable debt are entitled to receive a perpetual annuity as the interest of their money; but they have no claim whatever to the resti­tution of the principal paid in. Such is not the case with a redeemable or floating debt, which is to be paid off, either through a sinking fund or by drawings, or at a fixed specified date.

The certificates of a redeemable debt are specifically called bonds, that is: vouchers of an engagement binding the issuer to pay a certain amount of interest for the sum invested, and to repay the principal at a given time.


There are several descriptions of stocks and bonds on the market, owing to the different conditions upon which the issue may take place. Such descriptions are usually distinguished as active, passive, deferred, preference, debentures, and annuities.

Active stocks or bonds represent the most common form of stocks in the market; they bear a fixed rate of interest, payable in full from the date of issue.

Passive bonds, on the contrary, are called such as bear no regular interest, but entitle the holder to some future benefit, such as drawing prizes, etc.

Deferred bonds entitle their holders to a reduced rate of interest only, which is, however, gradually increas­ing, until it reaches the full figure previously fixed, when they are classed and changed into active bonds.


Preference bonds entitle the holder to a fixed rate of interest, which is to be paid before any part of the company’s profits are divided among the ordinary shareholders. Second and even third preference bonds are sometimes issued by companies in case of tem­porary embarrassment, which rank respectively after any previous issue, so as not to impair the security given for those already in circulation.

Debenture bonds, called also simply debentures, are issued by a government or company to meet tem­porary wants. They bear a fixed time of maturity, up to which interest is paid on them.

Annuities is a common appellation given to any kind of stock bearing a fixed rate of interest, either in perpetuity or up to a certain stated term. Such stocks are, therefore, distinguished as perpetual annuities, long annuities, and short term annuities.

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