Bonds

Bonds

What are the key features of a bond? What is interest rate risk?

2. Which bond has more interest rate risk, an annual payment 1-year bond or a 10-year bond? Why?

3. Discuss and compare the passive bond management and active bond management.

Answer preview……….

Bonds are effective ways using which governments and corporations borrow money to fund different projects. As there is always an initial amount issued to the government or the corporate entity, the face or par value is one of the primary characteristics of the bonds (Kaufman & Hopewell, 2017). This includes the initial amount issued by the lender to purchase the bond. Consequently, it would be determined by the amount the organization or government entity intends to raise. Secondly, the interest rate represents the amount of interest earned by the bond until maturity. Such interest is paid annually to the bondholder until the maturity time comes, and the issuer refunds the bondholder, an amount equivalent to the par value of the bond. Ultimately, maturity is another key characteristic of bonds, as it represents the time during which the issuer ought to pay the bondholder for the bond previously issued……………

APA 355 words