Chapter 3: Bond Valuation

A bond is a document of title for a loan. Bonds are issued, not only by businesses, but also by national, state or city governments, or other public bodies, or sometimes by individuals. Bonds are a loan to the company or other body. They are normally repayable within a stated period of time. Bonds earn interest at a fixed rate, which must usually be paid by the undertaking regardless of its financial results.

Here this fixed "interest rate" is completely different from the "interest rate" we learnt from the previous chapters in the sense of price of time value. You should be extremely careful here. To avoid confusion, this bond "interest rate" is often called "coupon rate".