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Bond Valuation
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Section 3

Key Characteristics of Bonds

Book Version 3
By Boundless
Boundless Finance
Finance
by Boundless
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6 concepts
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Par Value

Par value is the amount of money a holder will get back once a bond matures; a bond can be sold at par, at premium, or discount.

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Coupon Interest Rate

The coupon rate is the amount of interest that the bondholder will receive per payment, expressed as a percentage of the par value.

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Maturity Date

Maturity date refers to the final payment date of a loan or other financial instrument.

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Call Provisions

A callable bond allows the issuer to redeem the bond before the maturity date; this is likely to happen when interest rates go down.

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Sinking Funds

A sinking fund is a method by which an organization sets aside money to retire debts.

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Other Features

Other important features of bonds include the yield, market price and putability of a bond.

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