Q.State the features of Bonds.

A bond is a long-term debt security through which the issuer borrows money from investors and agrees to pay a fixed rate of interest and repay the principal on maturity. Its main features are creditorship, fixed interest, fixed maturity, transferability and priority in repayment.

A bond is a debt instrument. When an investor buys a bond, he is effectively lending money to the issuer (a company or government), which promises to repay the amount on a stated date and to pay interest at regular intervals until then. Bonds are similar to debentures and are an important source of borrowed capital.

Features of bonds:

• Creditorship, not ownership: A bondholder is a creditor (lender) of the company, not a shareholder or owner. He does not get any share in profits or in management.
• Fixed rate of interest: Bonds carry a pre-decided (fixed or floating) rate of interest called the coupon rate, which is paid regularly regardless of whether the company earns profit.
• Fixed maturity period: Every bond has a definite maturity date on which the principal (face value) is repaid to the holder.
• Repayment of principal: The amount borrowed is returned in full on maturity, either in a lump sum or in instalments.
• Secured or unsecured: Bonds may be backed by the security of the company's assets (secured) or issued only on the general creditworthiness of the issuer (unsecured). …