Features of a financial bond

In order to fully understand what a bond is, you need to know what the features of a bond are to clearly see how it differs from other financial products.

This article and the next look at the seven key features of financial bonds.

Here are the first four of them:

1) Negotiable debt instrument. This means that you can buy and sell it, effectively, and it comes on a piece of paper

2) Fixed period. The bond will have a date called maturity which is when it runs out. The fact it has a specified time means that this gives a clear timescale for the bond and is an important feature

3) It pays interest. This means that of course you will get paid interest for lending the money to the issuer of the bond and there are different rates of interest on offer and this varies a lot across bonds, timescales and reason of issue

4) Paid regularly. There are a range of market conventions about and some will pay on a six monthly basis, others will pay on an annual basis and on some rare occasions there are still other arrangements out there when it comes to payments.

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