The quintessential things you should know about bonds would be its key features: maturity date, par value and coupon rate. We use a Hong Kong government bond to illustrate.
Maturity
Like all loans, bonds also have a set time for repayment of the loan principal. The maturity date of a bond determines when the bondholder will be repaid the loan principal. For our example in Table 1, the maturity date is 13 January 2020.
Par Value
The loan principal is also known as par value, face value or nominal value of the bond. When a bond is issued and traded on the secondary market, the price of the bond can fluctuate. Regardless of the price you pay for the bond, you will receive the par value upon maturity. The par value of the Hong Kong government bond in Table 1 is HK$1,000,000.
Coupon Rate
Coupon is the periodic interest payment made to bondholders during the life of the bond. It is expressed as a percentage of par value. The coupon rate of the bond in our example is 2.93% and so the coupon payable to the bond holder each year will be HK$29,300 (2.93% of HK$1,000,000). As this is a fixed rate debt, the coupon amount will not change for the entire life of the bond.