Question

What is a bond? What is face/principal value? What is maturity value? What is stated interest rate? What the types of bonds and be able to define each one? What is a bond issued at premium, at discount or par (face) value mean? What is market interest rate? What is maturity date? Why do investors buy bonds? What is leverage? What is debt-to-equity ratio?

Answer 1

o What is a Bond ? - A bond, also known as a fined in como security, is a debt instrument created for the purpose of raising Capital. They are essentie loan agreements between the bond issuien and an investore, in which the bond issuer is obligated to pay a specified amount of money at specific future dates. (2) What is face / Principal value ? face value is a financial teren used to describe the nominal value of a security, as stated by its issuer for stocks the hace value is the original cost of the stock as listed on the certificate 1. for Bonds, it is the amount paid to the holder at maturcity, which is customarily & 1000. The face value for Bonds is often referred to as "par value" or simply "pan"

6) What is maturity value ? - Maturity value is the amount payable to an investon an investor at the end of a debt instrument's holding period Maturity date). for most bonds, the maturity value is the face amount of the bond for some certificates of deposit (co) and other investments, all of the interest is paid at maturity. If all of the interest is paid at maturity, each of the interest payments may be compounded. To calculate the maturity value for these investments, the investor adds all of the compounding interest to the principal amount Coriginal investment ). Maturity value formular Maturity value (Mv) = P x (1tk) n Where, .p is the Principal value or is the rate of intenest applicable on is the number of compounding intervals since the time of the date of deposit till maturity.

w What is stated interest rate ? Ans. The stated interest rate is the interest rate listed on abond coupon. This is the actual amount of interest paid by the bond issuer. This is the issuer pays $60 on a bond with a face value of $ 1000, then the stated interest rate is 64.. Hence, the stated interest nate of a bond payable is also known as the face interest rate, the nominal interest rate, the contractual interest rate, and the coupon interest rate our 6 and be able to What the types of bonds define each one ? Types of Bond ! W h fined rate bond i in fined hate bond, the interest remains - fined through out the tenure of the bond - (1) floating nate bond! floating rate bonds have a fluctuating interest rate as per the connent market - reference rate.

( Zeno interest rate bonde! zero interest rate bonds do not pay any regulan interest to the investors. Here only principal amount is paid. [ Inflation Linked Bonds: Bonds linked to inflation are called inflation linked bonds. The intenest nate of inflation linked bonds is generally lower than fined nate bords v perpetual bonds mi) Subordinated bonds WD Bearen bonds (uti hlar Bords Serial Bonds Climate Bonds (6) What is market interest kase! Ans: The market intenest nate is the prevailing interest rate offered on cash deposits. This rate is driven by multiple fantons in factors, including central bank interest rate, the flow of of sunds into and out of a country, the duration of deposits and the size of deposits.

(7) What is maturity date ? Ans: in finance maturity date refens- to the final payment date of a loan or othen financial instrument at which point the principal is due to be paid. (8) Why do investors buy bonds ? Investors buy bonds because : O They provide a predictable incom steam stream. Typically, bonde pay interest twice a year [ If the bonde are held to maturity, Gond holders get back the entire principe- so bonds are a way to preserve capital while investing. (on Bonds can help offset enposure to more volatile stock holdings.

Ja) What is levenage ? W Liverage results from using bonnowed capital as a funding source when investing to expand the firm's asset base and generate neturns on risk capital ( Levenage is an investment strategy of Using borrowed money specifically the use of various financial instruments on borrowed capital to increase the potential return of an investment. (16) What is Debt-to-equity namo ? O Debt - Equity ratio also known as Enternal - internal equity ratio, is calculated to measure the relative claims of outsiden's and the owners ne Shareholders against the firms assets. Dett-equity natio & outsidens fond shantholders fond