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1. Face Value (Par Value): Face value, or par value, is the amount the issuer promises to pay the bondholder at maturity. 2. Coupon Rate: The coupon r...
Bonds are major components of the global financial system and offer investors a relatively stable source of income. However, investors will not make i...
Some of the bonds, especially those issued by small companies or less common governments, might not be very liquid since they cannot be easily traded....
Inflation reduces the value of money; thus, it diminishes the purchase power of the fixed interest received by the bond. If inflation moves higher tha...
The chance that interest or principal payments will not be made because the issuer defaults. For lower-credit-rated issuers, "junk" bonds, credit risk...
It has already been established that the price of bonds moves in an inverse relation with interest rates. This means that if interest rates are increa...
While bonds are safer compared to equities, they are not a completely risk-free investment. These include the following risks:
1. Interest Rate Risk:...
The price of a bond is responsive to prevailing interest rates in the market. This means that an increase in interest rates lowers the price of a bond...
Conversely, if interest rates decline, existing bonds with higher coupon rates become more attractive, which would boost bond prices. Bonds are sold i...