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Bonds Bond Basics There are several features of bonds you should understand. Click on each of the terms on the left for a more complete definition of that term. Principal or Face Amount       The original amount that the bond was issued for. Standard face values are $1,000 and $5,000, but bonds can also be issued in larger or smaller denominations. Maturity Date       The date when the original amount of the bond must be paid back. Bonds that mature in two years or less are usually dubbed short-term; maturities up to 10 years are called intermediate; and bonds maturing in 10 years or longer get the long-term label. Interest or Coupon Rate       The fixed percentage rate that the bond will pay annually to the lender. For instance, a 7% coupon rate pays $70 a year on each $1,000 of face value.   Quick Question Question: What does this mean? MCB Corporation, $1,000, 10%, 1/1/2020 A. This is a $10,000 bond (principal or face amount), that matures on January 1, 2020 (maturity date). Over the life of that bond, the investor will receive 10% (coupon rate) interest, or $100 per year in income until maturity. At maturity, the $10,000 loan to MBC Corp. will be returned to the investor in cash. B. This is a $100 bond (principal or face amount), that matures on January 1, 2020 (maturity date). Over the life of that bond, the investor will receive 10% (coupon rate) interest, or $100 per year in income until maturity. At maturity, the $100 loan to MBC Corp. will be returned to the investor in cash. C. This is a $1,000 bond (principal or face amount), that matures on January 1, 2020 (maturity date). Over the life of that bond, the investor will receive 10% (coupon rate) interest, or $100 per year in income until maturity. At maturity, the $1,000 loan to MBC Corp. will be returned to the investor in cash. D. This is a $1,000 bond (principal or face amount), that matures on January 1, 2020 (maturity date). Over the life of that bond, the investor will receive 1% (coupon rate) interest, or $10 per year in income until maturity. At maturity, the $1,000 loan to MBC Corp. will be returned to the investor in cash. < PREVIOUS NEXT > #38599