Bonds (4)

Basic characteristics of a bond

The basic characteristics of a bond are:

A maturity date - date the amount borrowed must be repaid;

A stipulated rate of interest payment or coupon rate

- the coupon rate is normally a fixed rate though interest can be paid on a floating rate basis according to a pre-agreed formula;

the face or par value (principal sum) redeemable upon maturity.

Bonds are often referred to as 'fixed income' securities because the investor knows how much he will get back on maturity.