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A bond with a par value of $1,000 and a semiannual coupon has a yield to maturity of 6.60% and a current price of $1,035. If the bond has 8 years to maturity, 6.93% is its current yield.
In finance, a bond is a type of security under which the issuer (borrower) owes a debt to the holder (the creditor) and is obliged – depending on the terms – to repay the principal (i.e. the borrowed amount) of the bond at maturity. date and also the interest (so-called coupon) for a certain period of time. Interest is usually payable at fixed intervals: semi-annually, annually and less frequently at other times. A bond is therefore a form of loan or IOU. Bonds provide the borrower with external means to finance long-term investments or, in the case of government bonds, to finance current expenditures.
Both bonds and stocks are securities, but the main difference between them is that shareholders (equity) have an ownership interest in the company (i.e., they are owners), while bondholders have a creditor interest in the company (i.e., they are creditors).
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