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In finance, a bond is a type of security under which the issuer owes the holder a debt, and is obliged – depending on the terms – to provide cash flow to the creditor (e.g. repay the principal (i.e. amount borrowed) of the bond at the maturity date as well as interest (called the coupon) over a specified amount of time. [1]
Advantages: A bond ETF allows you to buy the “slice” of bond exposure you want, and bond funds typically have well-diversified exposure to issuers, reducing credit risk. Other risks depend ...
This happens because new bonds are issued with higher interest payments, making them more attractive than existing bonds with lower payouts. The opposite tends to happen when interest rates decline.
Source: Corporate Finance Institute. How to invest in bonds. If you want to invest in bonds, you can purchase them in three ways. Buying individual bonds: You can buy individual bonds through a ...
Bond valuation is the process by which an investor arrives at an estimate of the theoretical fair value, or intrinsic worth, of a bond.As with any security or capital investment, the theoretical fair value of a bond is the present value of the stream of cash flows it is expected to generate.
Original Issue Discount (OID) is a type of interest that is not payable as it accrues. OID is normally created when a debt, usually a bond, is issued at a discount.In effect, selling a bond at a discount converts stated principal into a return on investment, or interest.
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