Characteristics Of A Bond Characteristics Information Table

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Classifying bonds takes an extensive accumulation of data. For starters, there are many different bond markets. In fact, if all the characteristics related to a bond was given in the form of a bond characteristic information table, the table would have five ‘primary keys’: corporate, government, municipal, mortgage backed, and funding. The volatility, interest rate given, and required rate of return by participants of the bond is determined by the ‘primary key’ the bond falls under. In addition to that, like the structure of most information tables, all other attributable data and foreign keys of a bond is recorded after its primary key (or bond market it is distributed in) is listed.
Attributable data, along with any foreign keys, is essential
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A bond value table would include the following attributes: the par value of the bond, years left to maturity, the annual interest payment, required rate of return (or yield to maturity), and the present value (or market value) of the bond. The first two attributes would not be affected by any of the characteristics listed a bond characteristic information table, the last three attributes would. The par value of a bond is, “the face value of a bond that is returned to the bondholder at maturity”3. The face value of a bond is almost always in denominations of $1000. The maturity of a bond is, “the length of time until a bond issues returns the par value to the bondholder and terminates the bond”3. Years left to maturity is a key element in determine the value of a bond because, “…risk is determined, at least in part, by the length of time an investor is required to commit to an investment”3. The annual interest payment is affected by the other characteristics of a bond. For example, if a bond is noted as debenture in a bond characteristic table the coupon rate will be higher for that bond than a US Treasury Bond because greater risk is assumed by the bondholder. The annual interest payment will be the same amount that is listed as a bond’s coupon interest rate. Meaning that the annual interest payment, “indicates the percentage of the par value of the bond that will be paid out annually in the form of interest”3. The two are synonymous and are crucial aspects of each table they are listed on. The required rate of return is affected both by the characteristics of a bond itself and by investor’s attributes and assessment of a bond. The required rate of return, “embodies the investor’s attitude about assuming risk and the investor’s perception of the riskiness of the asset”3. Finally, the present value, or market value, of a bond is indirectly affected by all the characteristics of a bond

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