Question

What is a bond?

How the bond works?

How the bonds are classified?

Answer 1

What is a bond?

A bond is a fixed income instrument that represents a loan to a company or government that pays investors a fixed rate of return over a specific timeframe. Investors in bond lend a government or business money for a set period of time, with the promise of repayment of that money plus interest.

How the bond works?

Bonds work by paying back a regular amount, also known as a "coupon rate" and are thus called a type of fixed-income security. The initial price of most bonds is typically set at par, usually $100 or $1000 face value per individual bond. The actual market price of a bond depends on a number of factors: the credit quality of the issuer, the length of time until expiration and the coupon rate compared to the general interest rate environment rate at the time. the face value of the bond iswhat will be paid back to the borrower once the bond matures.

How the bonds are classified?

A bond is classified according to the

(1) Collateral: Whether the bons is fullt secured by a specific asset that can be sold by the bondholdder to satisfy a claim

(2) Convertibility: Whether the bond can be exchanged for other securities of the issuing company at a future date

(3) Maturity: Whether the bond has one maturity date or several, and how long is the maturity period: longer the maturity period, greater the risk and higher the interest rate.

(4) Price: Whether the bond is sold below par value, at par value, or above par value.