Bond basics Some terminology Fixed features of bonds – Principal (face value/par value): amount bond states is owed to DHs Bonds usually have face value of $1,000 – Maturity: the date the principal needs to be repaid – Coupon: annual interest that the bond states issuer will pay – Optional features Secured bond: certain assets serve as collateral Guaranteed bond: someone other than issuer guarantees payment Callable (redeemable) bond: issuer may redeem (pay) bond before maturity, often requires paying call premium (e.g., one year's worth of extra interest).
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