Most bonds have a predetermined term. At the beginning of the term, investors provide the issuer with capital by purchasing the bond or, as it is also called, subscribing to the bond. Interest is paid on the bond during the term. At the end of the term, the bond is repaid (redemption).
- Interest payments to the investor are made once a year for most bonds (= annual coupon date). Some bonds also pay interest semiannually or quarterly.
- The denomination of a bond refers to the smallest possible unit that can be traded. For retail bonds, the denomination is usually 100 EUR, 500 EUR, or 1,000 EUR; for offerings to institutional investors, it is often 50,000 EUR or more. Austrian government bonds are issued in denominations of 1,000 EUR or more. The sum of all units (denomination × number of units issued) is referred to as the total nominal value.
- The issue price, redemption price, market price and coupon are expressed as a percentage of the nominal value. For example, one unit of a bond with a nominal value of 1,000 EUR corresponds to 100 percent. An issue price of 101 means that one unit costs 1,010 EUR (= 101% of 1,000). The issue price and the redemption price can be exactly equal to the nominal value (= par), below the nominal value (= below par), or above the nominal value (= above par). A price below par is also referred to as a discount (= disagio), while a price above par is referred to as a premium (= agio).
