Understanding Bonds
Posted By George on December 14, 2009
There are several things you must understand about bonds before you start investing in them. Does not understand these things can cause you to purchase the wrong bonds, at the wrong maturity date.
The three most important things that must be considered when buying bonds, including par value, on the maturity date and coupon rate.
The par value of bonds refers to the amount of money you will receive when the bond reaches maturity date. In other words, you will receive back your initial investment when the bond reaches maturity.
The maturity date, of course, that the bond will reach full value. On this date, you will receive an initial investment, plus the interest you have earned money.
Company and State and Local Government bonds can be ‘called’ before they reach maturity, at which time the corporation or the government will issue a return your initial investment, together with the interest that has been until now. Federal bonds can not be ‘called’.
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