Article: " The face value (or par value) is the amount that the bond pays at maturity. For instance, a 10-year, $5,000 bond will pay $5,000 when it matures ten years after its date of issue. Therefore, the face value of the bond is $5,000, regardless of any interest or dividend payments you may receive during that time. " The coupon payment is the amount the bond pays periodically in interest. In most cases, coupon payments occur twice a year. If a $5,000 bond pays 10% annually, then each semiannual coupon will pay $250. That's a total payment of $500 a year (or 10% of $5,000). " The coupon yield is the annual coupon payment expressed as a percentage of the bond's face value. In the example above, the coupon payment is $500, and the face value is $5,000. Therefore, the coupon yield can be expressed as 10%, which is $500/$5,000. " The current yield is the annual coupon payment amount divided by the current bond price. This gives you the coupon payment as a percentage of the current bond price. If the coupon payment is, for example, $500 and you calculate the bond's price (value) to be $4,800, then the current yield is $500/$4,800, which would be 10.4%. " A bond's yield to maturity is defined as the discount rate that yields the market price of the bond. This requires some additional calculations. You can read more about this particular calculation at yield to maturity. In the financial industry, a few companies research and rate bonds based on their quality, history and expected performance. The primary agencies that provide bond ratings are Standard & Poor, Moody, and Fitch. Bond ratings are grades given to bonds so that investors may judge the relative safety of any given bond investment. The highest Standard & Poor's rating is AAA. AA, A and BBB are medium-quality bonds. BB, B, CCC, CC, C, and D are "junk" bonds. The D rating means the bond has defaulted. A bond is selling at a discount when its yield to maturity is greater than its current yield and its coupon yield. A bond is selling at par when its yield to maturity is equal to its current yield and its coupon yield. A bond is selling at a premium when its yield to maturity is less than its current yield and its coupon yield.
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Know your bond's "face value. Understand your "coupon payment. Find out your bond's "coupon yield. Measure your bond's "current yield. Find the bond's "yield to maturity. Look up the bond rating. Consider whether a bond is at a discount, at par, or at a premium.