Let's look at an example.
Before you buy a bond, always check to see if the bond has a call provision, and consider how that might impact your investment strategy.
Bond maturities can range from one day to 100 years, but the majority of bond maturities range from one to 30 years.You usually receive some call protection for a period of the bond's life (for example, the first three years after the bond is issued).Accrued Interest, accrued interest is the interest that adds up (accrues) each day between coupon payments.If the interest rate at which you reinvest your coupons is higher or lower, your total return will be more or less.They allow the issuer to retire a bond before it matures.If a bond with a 5 coupon and a ten-year maturity is sold on the secondary market today while newly issued ten-year bonds have a 6 coupon, then the 5 bond will sell for.56 (par value 100).The Power of Compounding.This also means that when interest rates fall and bonds are sold at a premium, bonds with shorter maturities will have smaller premiums than bonds with longer maturities.Also be aware that taxes can reduce your total return.The price of a bond can be above or below its par value for many women to get to know Switzerland reasons, including: interest rate adjustments to the bond; whether a bond credit rating has changed; supply and demand; a change in the creditworthiness of a bond's issuer; whether the bond.If you're selling, you're entitled to the price of the bond, plus the accrued interest that the bond has earned up to the sale date.Bond Maturity, a bond's term, or years to maturity, is usually set when it is issued.
Now what happens if this 5 bond matured in twenty years?
Callable bonds are common.
Similarly, the term bond market is often used interchangeably with "fixed-income market.".The vast majority of bonds have a set maturity datea specific date when the bond must be paid back at its face value, called par value.The shorter the bond's maturity, the smaller the discount.The coupon is always tied to a bond's face or par value, and is"d as a percentage of par.You can also reinvest the interest, letting your interest gain interest.The further a bond is from maturity, the greater will be the difference between the purchase price and the redemption value at maturity.Bonds are called fixed-income securities because many pay you interest based on a regular, predetermined interest ratealso called a coupon ratethat is set when the bond is issued.