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Home Dictionary E Effective Yield The effective yield is calculated by dividing the coupon payments on the bond by the current market value of the bond. Effective yield implies reinvestment of coupon payments. Reinvested coupons mean that the effective yield of the bond is higher than the nominal (stated coupon) yield. To compare the effective yield of a bond and its yield to maturity, the effective yield must be converted to an effective annual yield. Bonds trading at an effective yield above the yield to maturity are sold at a premium. If the effective yield is lower than the yield to maturity, the bond trades at a discount. AAA
September 25, 2022 The highest possible rating a bond can receive is AAA, which is awarded only to those bonds that demonstrate the highest level of creditworthiness. Accrued Interest
September 25, 2022 Accrued interest is a characteristic of accrual accounting and follows revenue recognition guidelines and accounting matching principles. Agency Bond
September 25, 2022 Federal government bonds and government-sponsored corporate bonds pay slightly higher interest rates than US Treasury bonds. Amortized Bond
September 25, 2022 An amortizing bond is a type in which each payment goes towards both interest and principal. At Par
September 25, 2022 Par value is the price at which the bond was issued, also known as its face value. Baby Bond
September 25, 2022 A baby bond is a bond with a par value of less than $1,000. Basis Point (BPS)
September 25, 2022 A basis point is a standard measure of interest rates and other percentages in finance.
– One basis point is equal to 1/100th of 1%, or 0.01% (and 0.0001 in decimal). Bearer Bond
September 25, 2022 A bearer bond is a physical certificate with coupons attached that is used to pay off interest payments. Bond Covenant
September 25, 2022 The Bond Agreement establishes certain actions to be taken or prohibited by the bond issuer. Bond Discount
September 25, 2022 A bond discount is the amount by which the market price of a bond is below its principal amount due to be redeemed. Bond Equivalent Yield (BEY)
September 25, 2022 Fixed income securities come in many forms. Bond Ladder
September 25, 2022 A bond ladder is a portfolio of fixed income securities in which each security has a significantly different maturity date. Bond Market
September 25, 2022 The bond market broadly describes the market in which investors buy debt securities that are marketed either by governments or corporations. Bond Quote
September 25, 2022 Bond quote refers to the last price at which the bond was traded. Bond Rating
September 25, 2022 A bond rating is a letter-based credit scoring scheme used to assess the quality and creditworthiness of a bond. Bond Rating Agencies
September 25, 2022 Bond rating agencies are companies that assess the creditworthiness of both debt securities and their issuers. Bond Valuation
September 25, 2022 Bond valuation is a way of determining the theoretical fair value (or face value) of a particular bond. Bondholder
September 25, 2022 A bondholder is an investor who purchases bonds issued by an entity such as a corporation or government agency. Callable Bond
September 25, 2022 A callable bond is a debt security that can be redeemed by the issuer before maturity at the option of the issuer. Commercial Paper
September 25, 2022 Commercial paper is a form of unsecured short-term debt. Convertible Bond
September 25, 2022 A convertible bond pays fixed income interest payments but can be converted into a predetermined number of shares of common stock. Convexity
September 25, 2022 Convexity is a risk management tool used to measure and manage a portfolio’s exposure to market risk. Corporate Bond
September 25, 2022 A corporate bond is a debt issued by a company to raise capital. Coupon Rate
September 25, 2022 The coupon rate is the nominal yield paid by a fixed income security. Creditor
September 25, 2022 A lender is an individual or institution that provides credit to another party to obtain a loan, usually under a loan agreement or contract.