what are the bond's key features course hero

What are bond's key features?

Key Features of Bonds. Most bonds have five features when they are issued: issue size, issue date, maturity date, maturity value, and coupon. Once bonds are issued, the sixth feature appears, which is yield to maturity.

Which are two features of a bond?

Two features of a bond—credit quality and time to maturity—are the principal determinants of a bond's coupon rate. If the issuer has a poor credit rating, the risk of default is greater, and these bonds pay more interest. Bonds that have a very long maturity date also usually pay a higher interest rate.

What are some of the features that could be included with a bond prospectus that may have an impact on the yield of a new bond issue?

Some of the main features of a corporate bond prospectus are information on interest payments, time to maturity, the credit quality of the issuer, and call provisions.

What is the main purpose of bond?

A bond is a debt security, similar to an IOU. Borrowers issue bonds to raise money from investors willing to lend them money for a certain amount of time. When you buy a bond, you are lending to the issuer, which may be a government, municipality, or corporation.

What are the three major features of bonds?

All bonds have three characteristics that never change:Face value: The principal portion of the loan, usually either $1,000 or $5,000. It's the amount you get back from the issuer on the day the bond matures. ... Maturity: The day the bond comes due. ... Coupon:

What are the features and types of bonds?

Following are the types of bonds:Fixed Rate Bonds. In Fixed Rate Bonds, the interest remains fixed through out the tenure of the bond. ... Floating Rate Bonds. ... Zero Interest Rate Bonds. ... Inflation Linked Bonds. ... Perpetual Bonds. ... Subordinated Bonds. ... Bearer Bonds. ... War Bonds.More items...

What six factors determine the yield on a bond?

Summary of factors that determine bond yieldsIs default likely? If markets fear the possibility of government debt default, it is likely they will demand higher bond yields to compensate for the risk. ... Private sector saving. ... Prospects for economic growth. ... Recession. ... Interest rates. ... Inflation.

What are the 5 types of bonds?

Types of BondsU.S. Treasury Securities.U.S. Savings Bonds.Mortgage-Backed Securities.Corporate Bonds.TIPS and STRIPS.Agency Securities.Municipal Bonds.International and Emerging Markets Bonds.

Which of the following are usually included in a bond's indenture?

Which of the following are usually included in a bond's indenture? The repayment arrangements and the total amount of bonds issued.

What is a bond and what are its three main components quizlet?

The Components of a Bond. The three major components of a bond are face(par) value, maturity date, and coupon rate.

What are the 7 types of bonds?

Treasury bonds, GSE bonds, investment-grade bonds, high-yield bonds, foreign bonds, mortgage-backed bonds and municipal bonds - explained by Beth Stanton.

What are the four main issuers of bonds?

Issuers sell bonds or other debt instruments to raise money; most bond issuers are governments, banks, or corporate entities. Underwriters are investment banks and other firms that help issuers sell bonds. Bond purchasers are the corporations, governments, and individuals buying the debt that is being issued.

Which are two features of a bond quizlet?

2 Characteristics of Bonds Flashcards | Quizlet....the amount and composition of existing debt.the stability of the issuers cash flow.the issuers ability to meet scheduled payments of interest and principal on its debt obligations.asset protection.management capability.

What are the three main components of a bond quizlet?

The three major components of a bond are face(par) value, maturity date, and coupon rate.

What are the 5 types of bonds?

Types of BondsU.S. Treasury Securities.U.S. Savings Bonds.Mortgage-Backed Securities.Corporate Bonds.TIPS and STRIPS.Agency Securities.Municipal Bonds.International and Emerging Markets Bonds.

What are bond ratings quizlet?

1. bond rating is indicator of default risk, so the rating has a direct, measurable influence on the bond's interest rate and firm's cost of borrowing. 2. most bonds are purchased by institutional investors, who are restricted to investment grade bonds (firm will have a hard time selling if BBB rating)

What are the features of a bond?

This article throws light upon the top six features of bonds. The features are: 1. Repayment of Principal 2. Specified Time Period 3. Call 4. Pledge of Security 5. Interest 6. Covenants.

What is the face value of a bond?

The face value of the bond represents the promise to repay the amount to the bondholder at the end of the specified period.

How long does a bond last?

Other issues of bonds are for medium term and their maturity is between 5-10 years. Shorter-term bonds are identified as those whose maturity is below 4 years. The bond indenture specifically gives the maturity date of the bond. This is the promise to pay the principal amount on a specified date after the expiry of the number of years for which it is issued.

What is the maturity date of a bond?

The second feature is the maturity date of the bond. The time specified in the bond is called the maturity date or date of repayment of principal amount. The maturity date of bonds varies according to the requirement of each organization. Some organizations issue bonds of a long-term nature. The number of years of these bonds varies from 20 years to 100 years maturity.

What is call bond?

Bonds have an additional feature of ‘call’. This is a privilege to the issuing company to re-purchase bonds at a slightly higher price above the par value. For example, a bond of face value of Rs. 1,000 and maturity of 20 years yields an interest of Rs. 70 annually. After the first 5 years of issue, the market rate of interest on bonds falls considerably.

What is a pledge of security?

The pledge of security is a promise to the bondholders in writing and signed under seal and presented to the trustee by the company. A simple promise to pay without the proper formalities is not considered as a pledge of security.

What is covenant in a bond?

Covenants are productive clauses in the bond indenture. They are agreements between the company and the bondholders through the trustees. Through these agreements the company binds itself to the bondholders.