Discover published sets by community

A bond is a fixed-income instrument that represents a loan made by an investor to a borrower, typically corporate or governmental. Example: U.S. Treasury bonds.

The coupon rate is the annual interest rate paid on a bond's face value. Example: A $1,000 bond with a coupon rate of 5$50 annually.

The maturity date is the date on which the bond will mature, and the bond issuer will pay the bondholder the face value of the bond. Example: A bond issued on January 1, 2000, with a 20-year maturity, will mature on January 1, 2020.

Face value, also known as par value, is the amount of money a bondholder will get back once a bond matures. Example: A bond with a face value of $1,000 will repay that amount at maturity.$

Yield is the rate of return received from investing in a bond, expressed as a percentage. It takes into account the bond's current market price, its coupon payments, and its time to maturity. Example: If a $1,000 bond with a 5$950, the yield will be higher than 5%.

Yield to Maturity (YTM) is the total return anticipated on a bond if the bond is held until it matures. Example: The YTM on a bond with a $100 annual interest payment,$1,000 face value, and 5 years to maturity, priced at $950.$

A bond rating is a grade given to a bond that indicates its credit quality. Private independent rating services such as Standard & Poor's, Moody's, and Fitch provide these evaluations. Example: AAA bond rating represents the highest-quality bonds that have a high degree of creditworthiness.

A Treasury bond is a government bond issued by the U.S. Treasury Department with a maturity of more than 10 years. Example: A 30-year U.S. Treasury bond.

A municipal bond is a debt security issued by a state, municipality, or county to finance its capital expenditures. Example: Bonds issued for building a new school in a city.

A corporate bond is issued by companies as a way of raising capital, and it tends to have a higher risk than government bonds. Example: A bond issued by Apple Inc. to finance a new factory.

A zero coupon bond is a debt security that does not pay periodic interest payments but is sold at a deep discount, and its return comes from the difference between the purchase price and the face value. Example: A bond purchased for $600 that has a face value of$1,000 at maturity.

A junk bond is a bond with a lower credit rating (BB or lower), and a higher risk of default, but typically offers a higher yield to compensate for the increased risk. Example: Bonds issued by a new company with unstable cash flows.

A callable bond can be redeemed by the issuer before its maturity date, usually at a call price above the face value. Example: A bond that can be called at a price of $1,050 ten years before it matures.$

A convertible bond can be converted into a predetermined number of the issuer's equity shares. Example: A bond that can be converted into 20 shares of the issuing company.

The bond indenture is a legal contract that details all the terms of a bond such as the interest rate, maturity date, convertibility, call provisions, and other features. Example: A contract stipulating a 5% coupon, 20-year maturity, and conversion terms for a bond issue.

Duration is a measure of the sensitivity of the price of a bond or bond portfolio to a change in interest rates, expressed in years. Example: A bond portfolio with a duration of 5 years would decrease in value if interest rates were to rise by 1%.

The price of a bond is how much it is worth on the secondary market and is usually expressed as a percentage of its face value. Example: A bond with a face value of $1,000 might be trading at 95, which means it's priced at$950.

A bond sold for less than its face value is known as a discount bond. Example: Buying a $1,000 face value bond for$900 means it's a discount bond.

A bond sold for more than its face value is known as a premium bond. Example: Buying a $1,000 face value bond for$1,100 means it's a premium bond.

Interest rate risk is the risk that the value of a bond will decrease due to an increase in interest rates. Example: A bond's price drops when the Federal Reserve raises interest rates.

Credit risk is the risk that the bond issuer will fail to make the required payments on time or default on the bond. Example: A company facing financial difficulties might not be able to pay the bondholders.

Liquidity risk refers to the risk that an investor might not be able to buy or sell bonds quickly without significantly affecting the bond's price. Example: A rare corporate bond may have few buyers or sellers at any particular time.

Inflation risk is the risk that inflation will diminish the purchasing power of a bond's future cash flows. Example: If inflation rates exceed the bond's yield, the investor will yield a negative real return.

Market risk, also known as systematic risk, refers to the risk that the value of a bond will fluctuate due to market-wide factors such as changes in interest rates. Example: A broad market decline due to a recession affecting all bond prices.

Default occurs when a bond issuer fails to make a principal or interest payment on time. Example: A corporation undergoing bankruptcy may default on its bond payments.

Accrued interest is the amount of interest that has accumulated on a bond since the last interest payment date but has not yet been paid out. Example: If a bond pays semi-annually and it's halfway through the payment period, it has accrued half the interest.

Investment-grade bonds are bonds with a high enough credit rating to be considered a low risk by most investors. These bonds have a rating of BBB- or higher by Standard & Poor's, or Baa3 or higher by Moody's. Example: A municipal bond with an AA rating.

Fixed-income securities are investment instruments that pay a set return over a fixed period. Bonds are the most common type of fixed-income security. Example: A 5% annual coupon bond.

A bond fund is a fund that invests in bonds and other debt securities. Bond funds can offer regular income and are managed by financial professionals. Example: A high-yield bond mutual fund.