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Bonds typically have two main components: principal and coupons (interest). The principal amount is the contribution of the bond towards financing whoever issued the bond, like the loan amount on a mortgage. Bonds generally pay coupons every 3-6 months and at maturity they repay the principal amount. If you own a single bond with a principal of 1,000$ until ...


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A bond's initially set Principal Amount, Term to Maturity, Coupon Rate, and Price, allow us to calculate its Effective Interest Rate, which, compared with the prevailing Market Interest Rate for similar bonds, allows us to calculate the bond's Market Value at any point in time. To explain in detail, let's define a few terms with a consistent example (the ...


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