7. What are the components of a bond?

What is Par Value

Par value, also known as face value or nominal value, is the amount printed on the bond certificate. It represents the principal amount that will be paid to the bondholder at maturity.

What is a Coupon

A coupon is the annual interest rate paid on a bond, expressed as a percentage of the bond's par value. The term comes from the physical coupons that bondholders once had to redeem for interest payments.

What is the Term

The term of a bond is the length of time from its issue date to its maturity date. It represents the period over which the issuer promises to pay interest to the bondholder before repaying the principal.

What is Market Value for a Bond

100 basis points == 1%

As the bond gets closer to the maturity, the bond value approaches to its par value. The volatility is higher for long-term bond.

When interest rates up, bond prices down. When interest rates down, bond prices up.