Bond Bonds And Bond Debt Essay

710 Words Mar 15th, 2016 3 Pages
A bond is debt instrument that a government or a company issues to raise money. Basically it is a contract between a government or a company who is acting as the borrower and investors who are acting as the lender. When investor buy a bond, they are lending money to the government or company that issued the bond, and in return, the government or company that issued the bond is agreeing to pay your money back, with interest, at some point in the future.
The following are the features of a bond
Face value is the amount the bond will be worth at maturity and the amount the bond issuer uses when calculating interest payments.
Coupon rate is the interest rate the bond issuer will pay on the face value of the bond.
Coupon dates are the dates on which the bond issuer will make interest payments.
Maturity date is the date on which the bond will mature and the bond issuer will pay the bond holder the face value of the bond.
Issue price is the price at which the bond issuer originally sells the bonds.
Trading of bonds
Many investors mistakenly believe that once you buy a buy a bond you have to hold onto it until it matures. That is simply not the case.
You can buy and sell bonds on the open market just like you buy and sell stocks. In fact, the bond market is much larger than the stock market.
Here are a few terms you should be familiar with though when buying and selling bonds:
Market price is the price at which the bond trades on the secondary market.
Selling at a premium is the…

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