Investing Assets & Markets Bonds Bond Basics: Issue Size and Date, Maturity Value, Coupon By Thomas Kenny Thomas Kenny Thomas Kenny is an expert on investing, including bonds, ETFs, and mutual funds. He has more than 25 years of experience in the finance industry and is a partner and co-founder at Boston Investor Communications Group, a communications company for mutual fund and other investment industry providers. learn about our editorial policies Updated on May 28, 2022 Reviewed by Thomas J. Brock Reviewed by Thomas J. Brock Thomas J. Brock is a CFA and CPA with more than 20 years of experience in various areas including investing, insurance portfolio management, finance and accounting, personal investment and financial planning advice, and development of educational materials about life insurance and annuities. learn about our financial review board Photo: PhotoAlto/Eric Audras / Getty Images You can add bonds to your investment portfolio to provide stability. That's because bonds are known to be safe investments. When you invest in bonds, you're getting a steady stream of income in times when your stocks may perform poorly. Bonds are a great way to protect your savings when you don't want to put your assets at risk. Learn more about the features of bonds and how to find the yield to maturity. Key Features of Bonds Most bonds have five features when they are issued: issue size, issue date, maturity date, maturity value, and coupon. Once bonds are issued, the sixth feature appears, which is yield to maturity. This becomes the most important figure for estimating the total yield you will receive by the time the bond matures. Issue Size and Date The issue date is simply the date on which a bond is issued and begins to accrue interest. The issue size of a bond offering is the number of bonds issued multiplied by the face value. For instance, suppose an entity issues two million bonds with a $100 face value. That means the issue size is $200 million dollars. The issue size reflects the borrowing needs of the entity issuing the bonds. It also shows the market’s demand for the bond at a yield that’s acceptable to the issuer. Maturity Date and Value The maturity date is the date on which you can expect to have your principal repaid. It is possible to buy and sell a bond in the open market prior to its maturity date. Keep in mind that this changes the amount of money the issuer will pay you as the bondholder based on the current market price of the bond. Bonds trade on the open market from their date of issuance until their maturity. That means their market value will typically be different from their maturity value. You can expect to receive the maturity value at the specified maturity date barring a default, even if the market value of the bond fluctuates during the course of its life. Coupon and Yield to Maturity The coupon rate is the periodic interest payment that the issuer makes during the life of the bond. For instance, a bond with a $10,000 maturity value might offer a coupon of 5%. Then, you can expect to receive $500 each year until the bond matures. The term “coupon” comes from the days when investors would hold physical bond certificates with actual coupons; they would cut them off and present them for payment. The actual yield you would receive if you purchased a bond after its issue date (the yield to maturity) is different from the coupon rate. This is because bonds trade on the open market. Yield to maturity is a calculated estimate of the total amount of interest income that a bond will yield over its lifetime. It is the value that most bond investors worry about. Example of a Bond's Yield As an example, we'll start with the dollar amounts from above. Suppose that a company issues 10-year bonds with a face value of $10,000 each and a coupon of 5% annually. In the two years following the bond issue, the company's earnings rise. This adds cash to its balance sheet and puts it in a stronger financial position. All else equal, its bonds would rise in price, say, to $10,500; the yield would fall, because prices and yields move in opposite directions. The coupon would remain at 5%, which means that investors would receive the same $500 payment each year. But investors who purchased the bond after it had already risen in price might receive different yields to maturity (YTM). It all depends on the price they paid for the bond. Be cautious of online YTM calculators and easy formulas. They are often inaccurate. Some financial advisors even confuse YTM with a bond's current value. The formula for calculating yield to maturity uses the bond's coupon, face value, and current price, and the number of years it takes to mature. Note YTM = ( C + ((FV - PV) ÷ t)) ÷ ((FV + PV) ÷ 2)Where:C: Interest or coupon paymentFV: Face value of the securityPV: Present value or price of the securityt: How many years it takes the security to reach maturity To calculate our bond's YTM: =($500 + (($10,000 - $10,500) ÷ 10)) ÷ (($10,000+ $10,500) ÷ 2)=($450) ÷ ($10,250)=.0439, or 4.39% Frequently Asked Questions (FAQs) What kind of bonds are there? There are five main types of bonds: Treasury, corporate, agency, municipal, and savings. Is it safe to invest in bonds? While some bonds are low-risk, and others come with higher risk, their price fluctuations are less dramatic than stock prices. Factors that affect bond price changes and bond risk include current interest rates, the credit rating of the bond issuer, and the age of the bond. Where can I get bonds? You can get Treasury and savings bonds through a brokerage or directly from the U.S. government. You can also get savings bonds at a bank. You can buy corporate and municipal bonds through a brokerage or an investment or commercial bank. Was this page helpful? Thanks for your feedback! Tell us why! Other Submit Sources The Balance uses only high-quality sources, including peer-reviewed studies, to support the facts within our articles. Read our editorial process to learn more about how we fact-check and keep our content accurate, reliable, and trustworthy. Corporate Finance Institute. "What Is the Yield to Maturity?" Financial Industry Regulatory Authority. "Buying and Selling Bonds."