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Interest that has accumulated on a bond but has not yet been paid to the investor.
Adjustable-Rate Bond
The coupon on an adjustable-rate bond is reset, no more than once a year, based on a predetermined formula, usually linked to an index.
Ask Price
Price being sought for the bond by the seller.
One-one hundredth of a percent. It is used to describe differences in the yield of a bond.
The price at which a buyer will purchase a security.
A simultaneous sale and purchase of two different bonds, may be done to pick-up yield, extend maturity, etc.
Recording and transferring ownership of a bond electronically.
Provision that allows the issuer to retire the issue before the scheduled maturity date. Callable bonds typically carry higher yields than bonds without a call provision.
The price at which a callable bond may be called, which is generally higher than the face value of the issue.
The top interest rate that can be paid on a floating-rate security.
Bonds backed by a pool of mortgage loans or mortgage pass-through securities.
Upper and lower limits on the interest rate of a floating bond.
Bond that can be exchanged for specific amounts of common stock in the issuing firm.
Denotes the periodic interest payment made to the bondholder during the life of the bond.
The risk that an issuer may not be able to meet future principal and interest payments due to the specific financial impairment on the part of the issuer; also know as default risk.
The ratio of the coupon to the current price of the bond, stated as a percentage. For example, a bond with a current market value of $1,000 that pays $85 per year and has a current yield of 8.5%.
Unique nine digit number assigned to a security
The difference between the face value and market price of a security, when the market price of the security is less than the face.
When an issuer fails to make timely payment of principal or interest.
Represents the price sensitivity of a security utilizing the weighted average term-to-maturity of a bonds' cash flows.
The interest rate at which banks can borrow money from other banks.
Lowest interest rate that can be paid on a floating-rate bond.
Investments used to minimize the impact of adverse movements in the market.
Bonds issued by an entity with higher credit risk, rated Ba or BB and below. A higher yield is typically offered to offset the higher credit risk.
Securities whose coupons move in the opposite direction of interest rates.
Bonds issued by organizations with higher credit ratings, rated Baa or BBB or above.
An organization which issues debt and is obligated to pay principal and interest or securities.
Bond with a rating of Ba or BBB or lower.
Using borrowed capital to increase investing power.
Measure of the ability to quickly buy or sell a security in the secondary market; also known as liquidity.
The scheduled date at which the issuer repays the bondholder his (final) principal payment.
A security that represents a direct interest in a mortgage pool. Payments are made to investors each month based on the monthly mortgage payments.
A bond which can not be redeemed prior to the maturity date.
The principle amount of a bond at maturity.
The amount paid for a security that exceeds the principal value.
The unscheduled payment of the principal amount on a mortgage or other debt prior to the maturity date.
The risk that when interest rates fall, mortgages will be prepaid, forcing other investors to reinvest at lower interest rates.
The market for new issues.
Allows the investor to sell the security back to the issuer at predetermined prices on designated dates.
Designations used by Credit Rating Agencies to give indications of risk.
Agencies that rate organizations credit risks.
The risk that interest or principal income will be reinvested at lower rates if interest rates decline.
The market where previously issued securities are sold.
Date for delivery of securities and payment of funds.
A schedule dictating the issuer to retire a certain amount of outstanding debt each year.
An agreement, arranged by a third party, where one party exchanges a series of fixed cash flows for floating-rate cash flows from a secondary party.
Date when the purchase or sale of a bond is executed.
The annual percentage rate earned on a security.
The imaginary line that connects an issuers' bond yields with those bond maturities.
Represents the rate of interest an investor will earn until the bond is called.
Represents the rate of interest that equates the present value of all future principal and interest payments with the market price on the security.
A security that pays a coupon. Interest is imputed by purchasing the security below face value.
