Question-31: What all the names by which you refer Principal value of a bond?

Answer: Bond’s principal value is also referred as , par value, or face value of a bond. Which is the amount to be repaid to the investor either at maturity or at those times when the bond is called or retired according to a repayment schedule or sinking-fund provisions.

Question-32: How coupon and principal are related?

Answer: Both principal and coupon are related, because par value is the basis on which the coupon or periodic interest rests. The coupon is the product of the principal and the coupon rate.

Question-33: What are the different measures in the bond market to realize the return?

Answer: Investors or evaluators in the bond market use several different measures to calcualte the possible return from investing in a particular bond:

• What is the current yield?
• What is the yield-to-maturity?
• What is the Yield-to-call for a callable bond?
• What is the yield-to-put for a putable bond?
• What is a yield-to-worst for bonds?

Question-34: What do you mean by yield-to-worst?

Answer: It represent the lowest yield for a particular bond.

Question-35: How does price is represented for a bond?

Answer: Always, price for a bond is represented at a percentage of par or face value. To convert the price quote into a dollar figure, one simply divides the price by 100 and then multiplies by the par value.

Suppose bonds current price is 102.5, which has par value $10000. So to calculate the dollar value of the bond, you have to do ((102.5/100)*10000) = $10250

Hence, bond is being traded at 102.5, if you need to buy a one bond for this security which has the par value as $10000. Then to buy, you have to actually pay $10250. That’s one of the reason, you see bond actual yield vary and one of the contributing factor is its current price.