Bond prices are usually quoted as a percentage of face value. The nominal or coupon interest rate on a bond is the rate the issuer agrees to pay and is also shown on the bond or in the bond agreement. Interest payments, usually made semiannually, are based on the face value of the bond and not on the issuance price. The effective or market interest rate is the nominal rate adjusted for the premium or discount on the purchase and indicates the actual yield on the bond. Bonds that have a single-fixed maturity date are term bonds.
Serial bonds provide for the repayment of principal in a series of periodic installments.
If bonds are sold above face value, they are said to be sold at a premium. If bonds are sold at a premium, the effective interest rate is less than the nominal rate because the issuers received more than the face amount of the bond but are required to pay interest on only the face amount. If bonds are sold below face value, they are said to be sold at a discount. If bonds are sold at a discount, the effective interest rate paid is more than the nominal rate since the issuer received less than the face amount of the bonds but are required to pay interest on the face amount. Callable bonds are bonds that can be redeemed by the issuer at specific prices, usually at a premium, prior to their maturity.