Conventional bonds

NotesObjective Test

Conventional bonds

A debt instrument, offering

  • a fixed rate of interest (coupon)

  • over a fixed period of time

  • with a fixed redemption value (usually par).

Bonds may be issued by governments or companies.

Bonds issued by companies are known as corporate bonds'.

Here is an example of a bond that was issued by Oracle:

Features of bonds
Issued at par
(unless deep discounted)
The coupon rate is fixed at the time of issue.
Marketable The ability to sell the debt can mean that investors accept a lower return compared to the return demanded by a bank on a term loan.
Redeemable Bonds are normally redeemable.
Some bonds do not have a redemption date, and are 'irredeemable' or 'undated'.
These are called perpetual bonds and are issued by banks.
NotesObjective Test