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Bonds & Fixed Income

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Bonds & Fixed Income

Bond

A tradable debt instrument under which the issuer borrows a sum and agrees to pay interest and repay the principal at maturity.

Bond Price = Present Value of all Coupon Payments + Present Value of the Principal Repayment ₹ Bonds & Fixed Income

Bond Covenant

A condition in a debt agreement restricting the borrower's actions or requiring it to maintain stated financial ratios.

Test: the agreement specifies obligations whose breach constitutes an event of default, whether or not a payment is missed qualitative Bonds & Fixed Income

Bond Market

The market in which debt securities are issued and traded.

Test: the instrument traded represents a debt obligation rather than an ownership interest qualitative Bonds & Fixed Income

Bond Price

The present value of a bond's remaining cash flows, discounted at the yield the market requires.

Price = Sum of (Coupon / (1 + Yield) raised to t) + Face Value / (1 + Yield) raised to n ₹ Bonds & Fixed Income

Bond Yield

The return a bond generates, expressed as an annual percentage of the price paid for it.

Yield varies by measure: Current Yield = Annual Coupon / Market Price; Yield to Maturity accounts for all cash flows and the redemption amount %