A fixed income security is a financial obligation of an entity (the issuer) that promises to pay a specified sum of money at specified future date.

Issuers of bonds include supranational organizations, sovereign governments, non-sovereign governments, quasi-government entities, and corporate issuers. The risk of the issuer failing to make full and timely payments of interest and/or repayment of principal is called credit risk. Credit risk is inherent in all debt investments.

The maturity date is the date when the bond issuer is obligated to pay the outstanding principal amount. It defines the remaining life of the bond.

• It defines the time period over which the bondholder can expect to receive interest payments and principal repayment.
• It affects the yield on a bond.
• It affects the price volatility of the bond resulting from changes in interest rates: the longer the maturity, the greater the price volatility.

The par value (principal, face value, redemption value, or maturity value) is the amount that the issuer agrees to repay the bondholder on the maturity date.

• Bonds can have any par value, though a par value of $1,000 is the most common.
• The price of a bond is typically quoted as a percentage of its par value. For example, a value of 90 means 90% of the par value.
• A bond may trade above (trading at a premium) or below (trading at a discount) its par value.

The interest rate that the issuer agrees to pay each year is called the coupon rate (or nominal rate). The coupon is the annual amount of the interest payment: par value x coupon rate.

In the U.S. most issuers pay the coupon semi-annually.

If you have a "6.5 of 12/1/2019 trading at 97," you have a bond that has a 6.5 coupon rate, matures on 12/1/2019 and is selling for 97% of its par value.

A floating-rate security's coupon payments are reset periodically according to some reference rate. The typical coupon formula is: coupon rate = reference rate + quoted margin.

• Examples of reference rates are LIBOR, U.S. Treasury yields.
• The quoted margin is the additional amount that the issuer agrees to pay above the reference rate. It is a constant value and can be positive or negative. It is often quoted in basis points.
• The coupon rate is determined at the coupon reset date but paid at the next coupon date.

A zero-coupon bond promises to pay a stipulated principal amount at a future maturity date, but it does not promise to make any interim interest payments. The value of a zero-coupon bond increases overtime, and approaches par value at maturity. The return on the bond is the difference between what the investor pays for the bond at the time of purchase and the principal payment at maturity. The implied interest rate is earned at maturity.

For example, if an investor purchases a zero-coupon bond for $60 with a par value of $100, the investor will earn $40 of interest over the life of the bond. The investor receives no payments until maturity of the bond when he or she will receive $100.

Bonds can be issued in any currency. If an issue has coupon payments in one currency and principal payments in another currency, it is called dual-currency issue. The holders of currency option bonds can choose the currency in which coupons and principals are paid.