ECONOMICS (CBSE/UGC NET)

Detailed explanation-1: -When the bondholders invest in the corporate bonds of a company, the company makes a legal commitment to provide regular interest payments on the principal amount based on the corporate bond rates. Furthermore, after maturity, the company has to pay back the principal amount to the bondholders.

Detailed explanation-2: -The coupon rate is the rate of interest the bond issuer will pay on the face value of the bond, expressed as a percentage.1 For example, a 5% coupon rate means that bondholders will receive 5% x $1, 000 face value = $50 every year.

Detailed explanation-3: -The most common form of corporate bond is one that has a stated coupon that remains fixed throughout the bond’s life. It represents the annual interest rate, usually paid in two installments every six months, although some bonds pay annually, quarterly, or monthly.

Detailed explanation-4: -Revenue bonds are a class of municipal bonds issued to fund public projects which then repay investors from the income created by that project.

Detailed explanation-5: -Bonds are debt financial instruments issued by financial institutions, big corporations, and government agencies having the backing of collaterals and physical assets. Debentures are debt financial instruments issued by private companies but are not backed by any collaterals or physical assets.