What is a bond?
A bond is a debt security, in which the authorized issuer owes the holders a debt and, depending on the terms of the bond, is obliged to pay interest.
There are various types of bonds:
- Treasury Bond
- Zero Coupon Bond
- Convertible Bond
Various Bonds terminologies:
Face Value – The original issue price of the bond. It’s the price at which the bonds were initially issued.
Coupon – The rate of interest offered by the issuer. The more secured the bond is the less the coupon would be.
Maturity – The date at which the principal amount is repaid to the investors.
Check out this excellent Infographic on Bonds: This had appeared in ET.
(Enlarge image by clicking on it)