Bonds

Bond

A certificate of indebtedness issued by a corporation, government, or other entity to raise capital.

Savings Bonds

Non-marketable bonds that can’t be bought in the open market.

Treasury Bonds

Marketable bonds that can be traded as securities in the open market.

Corporate Bonds

Bonds lent to corporations instead of borrowing from banks.

Municipal Bonds

Bonds offered by municipalities that are exempt from certain taxes.

Coupon Rate

The interest rate of a bond.

Yield

The combination of the bid price and the coupon rate that generates interest over time.

Bond Rating

A letter score assigned to a company based on its financial responsibility.

Issuer

The government body or corporation borrowing money.

Bid Price

The price that indicates what others are willing to pay for the bond.

Face Value/Par Value

The amount promised to be paid by the issuer at maturity.

Maturity Date

The date when the original investment in a bond can be claimed.

Callable Bonds

Bonds that can be redeemed by the issuer before maturity.

Junk Bonds

Bonds issued by corporations with poor credit ratings, offering high yields.

Convertible Bonds

Bonds that can quickly change in value based on economic conditions.

Interest Rate Risk

The risk that market interest rates will change significantly before maturity.

Liquidity Risk

The risk of being unable to sell a bond quickly at an efficient price.

Default Risk

The risk that the bond issuer will fail to make required payments.

Repayment Terms

The period from the start of credit to the final maturity of a transaction.

Secured Bonds

Bonds that are backed by collateral or mortgages.

Zero-Coupon Bonds

Bonds that pay no interest until they reach maturity.