features of bonds pdf
October 1, 2020 12:45 pm Leave your thoughts
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Issuer.
Bond characteristics are important because they outline the conditions of the investment and the payment and interest terms. Generally fixed. 0000047701 00000 n
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Types of Bonds. %%EOF
This article throws light upon the top six features of bonds.
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Repayment of Principal: Bonds are issued in denomination of Rs.
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Describe the effect a bond’s market price has on its yield.
Bonds of all kinds operate on the same basic principle: You as the investor loan money to the bond's issuer, and the issuer pays you interest on the loan, typically twice a year. 0000047158 00000 n
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%%EOF
Features of a Bond.
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Coupon interest rate: Stated interest rate.
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The Importance of Bond Characteristics. �^h+�������ISJ-ˤP���s��&E��^�Z������g���h�Ep��'��Z��}���=֟�8n��b���6�%�xDp��O�8U���y�b�i'� ��vW�����K� Bonds of all kinds operate on the same basic principle: You as the investor loan money to the bond's issuer, and the issuer pays you interest on the loan, typically twice a year. 0000012348 00000 n
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Interest 6. 0000046545 00000 n
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Corporate bonds normally have a par value of $1,000, but this amount can be much greater for government bonds.
Features of a Bond: Two of the most important features of a bond is their credit quality and tenure.
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The features are: 1.
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Face Value 0000012326 00000 n
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Issuer: • US Treasury/Government • States, municipalities, and agencies • Foreign governments (sovereign bonds) • Corporations 2. 0000008611 00000 n
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Bonds represent the debts of issuers, such as companies or governments. 0000004430 00000 n
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If the issuer of the bond is assigned a poor credit rating by the rating agencies the risk of default is quite high and the bonds issued by such corporate is likely to trade at a discount to the issue price.
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Generally speaking, bond prices move inversely to interest rates because the coupon rate usually remains constant through to maturity. 0000001769 00000 n
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Corporate bonds are debt obligations issued by corporations. Bonds are issued by government and private entities.
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The yield is the rate of return received from investing in the bond. 0000006550 00000 n
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They determine the rate of interest payable. H��U;r,7��s�e�O�����r��*�����j������ �h`4(�|�H���Ac���?�?�ߎN"������3� �y>u��`������^k��ƹ]}��}k���B�����|�U�y 0000010433 00000 n
Declines. Features of Bonds. 0000003346 00000 n
Repayment of Principal 2. They determine the rate of interest payable. 1,000 but there are also bonds of values of Rs. Generally speaking, bond prices move inversely to interest rates because the coupon 0000008076 00000 n
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�o�[^߂������������������������Txzz*<===<==��� (More…) 4 Maturity: Years until bond must be repaid. 0000003930 00000 n
That’s the case, for instance, with many mortgage bonds. 0000007750 00000 n
Bonds, Bond Valuation, and Interest Rates 2 Topics in Chapter Key features of bonds Bond valuation Measuring yield Assessing risk 3 Key Features of a Bond Par value: Face amount; paid at maturity. 500 and Rs. 0000012373 00000 n
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Key Takeaways Key Points. 0000000016 00000 n
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Y����k(�(� �Z�vAAac�9p#�M@��"��&w[;�� bO�>I`R�b��a���e�Ǡ��^����[�� Specified Time Period 3. special features it may have. Multiply by par value to get dollars of interest. 0000043011 00000 n
Let us have a look at the common features of bonds and the financial terms related to bonds. 0000011159 00000 n
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Bonds that pay part of their principal before maturity are said to “amortize” their principal. endstream
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Features of a Bond: Two of the most important features of a bond is their credit quality and tenure.
Coupon rate versus interest rate fluctuations Fluctuations in interest rates usually have the biggest impact on the price of bonds – interest rates can be affected by many things, including a change in inflation rates.
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Covenants. 0000006722 00000 n
Pledge of Security 5.
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Main features of bonds Yield to maturity Realized return Forward rates Yield curve or term structure of interest Prof. Lasse H. Pedersen 3 Main Features of Bonds 1. These debts are sliced up and sold to investors in smaller units - for instance, a … 503 28
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