International Business Finance Research Paper Example | Topics and Well Written Essays - 2000 words

International Business Finance - look Paper Examplere liable to pay the interest at the pre-determined rate throughout the raise of the bonds and repay the face value at the time of maturity which means there is no heading of incurring loss for the investors out of investing in much(prenominal)(prenominal)(prenominal) financial instrument (Burger, Sengupta, Warnock and Warnock, 2014). However, in late(a) times it has been noticed in Europe that in some countries such as Denmark, Germany and Switzerland, the government bonds as well as corporate bonds are yielding the investors a negative return. To be more specific, such negative yields are not inflation-adjusted returns the bonds are simply yielding the investors less than their capital (Ivashina and Becker, 2015). Therefore, the research composing will aim to investigate regarding credibility of bonds as a financial instrument, their buyers and the factors that may influence such investor to purchase bonds even with negative r eturns in order to find out the rationale behind such negative return and to identify buyers motivation behind purchasing such bonds with negative yield. For the purpose of analysis, relevant economic theory that may justify the reason behind buying bonds with negative yields shall also be incorporated.Traditionally, bond is considered to be one of the most secured investment options among all other financial instruments available in the financial system. Dann (2005) has defined financial instrument as a mechanism that institutes a contractual in effect(p) between the borrower and lender to receive and deliver some of money. Bond is a financial instrument that establishes a indenture between the two parties bond holder and issuer. The indenture specifies that the issuer will pay a heady or variable rate of interest during the whole life of the bond and will refund the principal(prenominal) amount at the time of maturity (Maginn, Tuttle, McLeavey and Pinto, 2010). Bonds can be of various types such as frozen(p) and floating rate of bonds, zero coupon bonds, perpetual bonds, inflation-index bonds