Characteristics of bonds
- Face value
- Interest
- Coupon or interest rate
- Maturity
- Issuers
When they need to raise money, governments and businesses issue bonds. By purchasing a bond, you are effectively lending the issuer money. In exchange, they commit to repay you the face amount of the loan on a particular date and to make periodic interest payments—typically twice a year—along the way.
Corporate bonds, municipal bonds, government bonds, and agency bonds are the four different types of bonds that can be categorized. The relationship between the Bond prices and the Coupon Rate is inverse. When the rate of interest rises, bond prices fall, and when the rate of interest falls, bond prices rise.
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