Fixed income securities are securities which promise to pay a fixed amount as a return to

the investors.

Three main Categories:

Treasury Bills – Debt securities maturing in less than one year.

Treasury Notes – Debt securities maturing in one to 10 years.

Treasury Bonds – Debt securities maturing in more than 10 years.

Face Value / Par Value: The face value (also known as par value or principal) is the amount
of money a holder will get back once a bond matures.

Coupon (The interest Rate):

The Coupon is the amount the bondholder will receive as interest payments. It’s called a
“coupon” because sometimes there are physical coupons on the bond that you tear off and
redeem for interest. However, this was more common in the past. Now a days, records are
more likely to be kept electronically.

Maturity:

The maturity date is the date in the future on which the investor’s principal will be repaid.

Bond

A debt investment in which an investment in which an investor loans money to an entity

(Corporate or governmental) that borrows the funds for a defined period of time at a
interest rate. Bonds are used by companies, municipalities, states and U.S. and foreign
governments to finance a variety of projects and activities.

Fixed Rate security have a coupon that remains constant throughout the life of the bond

Floating Rate security - have a coupon that is linked to money market index, such as LIBOR
or Euribor

Example: A three months USD LIBOR+0.20% if LIBOR IS 3.2% then the security will pay a
coupon of 3.4%

Accrual Bonds

These are usually longer term (5-10 Years) Zeroes and pay no coupons.

Hence they are sold at a deep discount to their face value, and mature at the face value.