What are the key features of a bond?

The key features of a bond include:

1. Face value: This is the amount that the bondholder will receive at maturity, also known as the par value or principal.

2. Coupon rate: It is the fixed interest rate that the bond issuer agrees to pay the bondholder annually or semi-annually. The coupon rate is usually expressed as a percentage of the bond's face value.

3. Maturity date: This is the date on which the bond will mature, and the issuer will repay the face value to the bondholder. Bonds can have short-term (less than one year), medium-term (one to ten years), or long-term (more than ten years) maturities.

4. Yield: It is the effective interest rate earned by the bondholder, taking into account the bond's current market price and coupon payments. Yield can be higher or lower than the coupon rate depending on the bond's price in the secondary market.

5. Credit rating: Bonds are assigned credit ratings by rating agencies to indicate the issuer's creditworthiness. Higher-rated bonds are considered less risky and typically offer lower yields, while lower-rated bonds carry higher yields to compensate for the increased risk.

6. Callability: Some bonds may have a call provision that allows the issuer to redeem the bond before its maturity date. This gives the issuer the flexibility to refinance at lower interest rates but can be disadvantageous for bondholders if interest rates decline.

7. Convertibility: Certain bonds, known as convertible bonds, give the bondholder the option to convert the bond into a predetermined number of shares of the issuer's common stock. This feature provides potential upside if the issuer's stock price increases.

8. Liquidity: The ease with which a bond can be bought or sold in the secondary market without significantly impacting its price is an important consideration for investors. Highly liquid bonds are more desirable as they offer greater flexibility.

These key features of a bond determine its risk and return characteristics, making it an important investment instrument for both issuers and investors in the financial markets.