Question

Identify the key characteristics common to all bonds.

Answer 1

Solution :

Key characteristics that is common to all bonds are

1. Face value:

Face value is the principal portion of the loan. It can be anything like $100, $1000 etc. What face value denote is that you will get this amount on the day the bond matures. Price of the bands can change but face value remains same throughout

2. Maturity:

Maturity is the time after which bonds mature and the investor gets the face value of the bond. e.g. if a bond has 10 years of maturity then an investor will receive the face value when 10 years get completed.

3. Market Price: All the bonds will have a current market price based on the yields and other factors

Apart from these, there are certain characteristics but that is not common to all the bonds

e.g. Coupon: Not available in case of zero coupon bond

Callable/puttable feature: only available to bonds with put or call provisions