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Introduction – Bonds


  • A bond is a debt security usually issued by a company or the government to raise funds
  • Example: A company ABC issues bonds of worth $100. An investor ‘X’ buys the bond by paying $100 to the company ABC. ABC promises to repay the money back to X after 5 years and also pay 5% of the $100 principle every year, semi-annually
  • In the above example:
    • Face Value: $100
    • Coupon rate: 5%
    • Time to maturity: 5 years

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