finance investments

1. What are the key features of a bond? What is interest rate risk?

2. Which bond has more interest rate risk, an annual payment 1-year bond or a 10-year bond? Why?

3. Discuss and compare the passive bond management and active bond management.

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Bonds

Bonds are effective ways using which governments and corporations borrow money to fund different projects. As there is always an initial amount issued to the government or the corporate entity, the face or par value is one of the primary characteristics of the bonds (Kaufman & Hopewell, 2017). This includes the initial amount issued by the lender to purchase the bond. Consequently, it would be determined by the amount the organization or government entity intends to raise. Secondly, the interest rate represents the amount of interest earned by the bond until maturity.

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