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A bond is a debt security that is run by a government or agency. It usually lasts for long periods of time, or durations, which will take longer to mature. There are many important bond definitions that you should know. The first bond definition you need to know is that of a bond fund. This is a type of mutual fund where you invest in bonds. You can invest in bonds of different values, including a baby bond that has a face value of less than a thousand dollars. Also, your bond will feature a Committee on Uniform Security Identification Procedure number for identification.

Some of the most important bond definitions to consider involve what types of bonds are out there. For example, bonds can have different periods of time for maturity, which is the date in which you will have to pay back the principal on the bond. For instance, a treasury bond is a standard type that features a maturity level between ten and thirty years. A treasury bill, however, is a bond that has a maturity level of less than a year. It is usually given out in an auction, where you will receive the bill at an interval stated by the Federal Reserve Bank of the United States. You will also need to consider the bid, which is the top price offered for a bill, when looking for one. The lowest price is the asked price.

There are other bonds with different maturity levels to consider too. A treasury note will have a maturity level between one and ten years. Also, an intermediate-term bond will mature in five to ten years. If you need to redeem your bond before maturity, however, you can take out a callable bond. Also, a tax exempt bond will not have any federal income tax involved. A zero coupon, meanwhile, will have no interest and is sold at face value, which is the par value, or original price, of the bond. However, there can be a discount, which is where the market price is less than par. The owner of this type of bond will receive a profit at bond maturity. Plus, a derivative zero bond is one that does not have coupon or principal payments, as the coupon will be sold separately. The coupon will be discussed later in this article. Read More>>

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What Are The Different Types Of Bond Definition?