The main features or characteristics of bonds can be described as follows:
1. Par Value Or Face Value
Price of a bond is called par value or face value. It is a principal amount of bond which should be paid at maturity period. Par value and market value are different because par value is always fixed and market value fluctuates according to the market situation.
2. Long-term Financing
It is a source of long-term financing (generally more than one year)
3. Maturity Period
Bond has fixed maturity period and amount of principal should be reimbursed. Maturity period may range from 1 year to 35 years.
Also Read:
Also Read:
4. Fixed Interest
Fixed rate of interest is another important characteristic of bond. Issuer pays fixed amount of interest to the investors annually, half-yearly, or quarterly which is known as coupon payment.
5. Resale
Investors can sell their bonds in the secondary market either at a discount (less than par value) or at a premium (more than par value).
