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This is the price of security plus accrued interest
The amount of money the issuer agrees to pay each year
Principal amount, face amount the issuer agrees to repay the bondholder at maturity.
Terms of bond issue, total amount issued, description of security, repayment, call, affirmative/negative covenants
Set forth what the borrower has promised to do. i.e. Timely pymts of interest/principal, pay all taxes due, maintain property.
Coupon Rate, Par value, and Maturity
Bonds that have a coupon rate that increases with time. Spelled out in bond indenture
Interest rate the issuer agrees to pay each year
Formula to determine the call premium to be offered to assure the bondholder a minimum yield.
The coupon rate changes based on a preset formula usually based on a
public rate (LIBOR, Treasury) Can be positive and negative and usually
have a ceiling (protect issuer, cap risk for holder) and a floor (risk
to issuer)
Debt obligations (asset backed, mortgage backed, bonds, bank loans) or
Preferred Stock (ownership interest which pays a fixed dividend from
profits)
Asset/mortgage backed bonds where interest/principal are paid monthly
5s of 6/30/25 = 5%, maturing at that date. Most pay semi, mortgage backed pay principal and interest monthly.
The period of time remaining until all payments have been made. 1-5 ST, 5-12 Inter, 12+ LT
Opposite of referenced rate. Formula: 10% fixed, 2x the reference rate (4) 10-8 = 2% coupon rate
When the bond is paid in full, the yield depends on the term(yield curve), the volatility is a function of it's maturity.
Set forth limitations and restrictions: limits the borrowers ability
to incur more debt, obligations to meet certain ratios, notify trustee
prior to asset sales
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