Bond

Definition

A fixed-income security in which an issuer borrows money and agrees to make periodic interest payments and repay the principal at a specified future date. Interest payments are typically based on a fixed coupon, though some bonds have no coupon or a variable rate, and may include call or put features.  Prices are quoted relative to a par value of 100: a price of 90 implies a value of $900 for a $1,000 face amount. Bonds trading above 100 are at a premium; at 100, at par; and below 100, at a discount. Prices change over time as interest rates, perceived credit quality and other factors evolve, and as the bond approaches maturity. Bond prices and yields move in opposite directions: when yields fall, prices rise, and vice versa. Bonds are part of the fixed-income asset class.