In: Categories » Legal and finance » Bonds and Leads » The basic features of a bond (maturity coupon rate and par value)
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A fixed income securityis a financial obligation of an entity (the issuer) who promises to pay aspecified sum of money at specified future date. The promises of the issuer andthe rights of the bondholders are set forth in the indenture. The par value (principal, face value, redemption value, or maturity value) is theamount that the issuer agrees to repay the bondholder by the maturity date.
Maturity is the time period between today's date and the date on which thebond ceases to exist. It defines the remaining life of the bond.
Bonds fall into four categories based on their maturity:
The interest rate that the issuer agrees to pay each year is called coupon rate. The coupon is the annualamount of the interest payment and is found by: par value x coupon rate.
The payments that the issuer makes to the bondholder can be in anycurrency. An issue in which payments to bondholders are in US dollars is calleda dollar-denominated issue. A nondollar-denominated issue is one inwhich payments are not denominated in US dollars. If an issue has couponpayments in one currency and principal payments in another currency, it iscalled dual-currency issue.
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