Corporations and governments issue fixed-income securities as a means of raising money. The owners of such debts lend money and expect to receive the principal when the debt matures. The issuer who wishes to borrow money may issue a fixed amount interest payment during the lifetime of the debt at pre-specified times.
The holders of debt securities, such as US Treasury bills, notes, and bonds, face the risk of default by the issuer. The federal government and municipal government are thought to face the least default risk, since they can easily raise taxes and create more money to repay the outstanding debts.
Most bonds pay a fixed amount of interest semi-annually, while some pay quarterly, or annually. These interest payments are also referred to as coupons. They are quoted as a percentage of the face value or par amount of the bond on an annual basis.
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