ECONOMICS (CBSE/UGC NET)

Detailed explanation-1: -The amount that the bond issuer promises to pay the buyer at maturity is its par value. Maturity is the date the bond is due to be repaid. The coupon rate is the interest rate a bondholder receives every year until a bond matures. The yield is the annual rate of return.

Detailed explanation-2: -What Is a Bond’s Par Value? A bond is essentially a written promise that the amount loaned to the issuer will be repaid. The par value is the amount of money that the issuer promises to repay bondholders at the maturity date of the bond.

Detailed explanation-3: -At maturity, the issuing entity must pay the bondholder the par value of the bond, regardless of its current market value. This means that if an investor purchases a five-year $1, 000 bond for $800, they collect $1, 000 at the end of five years in addition to any coupon payments they received during that time.

Detailed explanation-4: -The par value of bonds definition refers to the principal – the amount of money the bondholder receives when the bond matures. Par value is also called face value or nominal value. It is the amount stipulated in the bond contract. However, par value does not include interest payments.

Detailed explanation-5: -A callable bond is a debt instrument in which the issuer reserves the right to return the investor’s principal and stop interest payments before the bond’s maturity date.