Section 3
Key Characteristics of Bonds
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Boundless Finance
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6 concepts
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Par Value
Par value is the amount of money a holder will get back once a bond matures; a bond can be sold at par, at premium, or discount.
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Coupon Interest Rate
The coupon rate is the amount of interest that the bondholder will receive per payment, expressed as a percentage of the par value.
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Maturity Date
Maturity date refers to the final payment date of a loan or other financial instrument.
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Call Provisions
A callable bond allows the issuer to redeem the bond before the maturity date; this is likely to happen when interest rates go down.
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Sinking Funds
A sinking fund is a method by which an organization sets aside money to retire debts.
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Other Features
Other important features of bonds include the yield, market price and putability of a bond.