Straight Bond

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DEFINITION of 'Straight Bond'

A bond that pays interest at regular intervals, and at maturity pays back the principal that was originally invested. Straight bonds are debt instruments because they are essentially loaning money (creating debt) to an entity. The entity (government, municipality, or organization) promises to pay the interest on the "debt" and at maturity pay back the original loan.

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BREAKING DOWN 'Straight Bond'

A straight bond is the most basic of debt investments. It is also knows as a plain vanilla bond because there are no additional features that other bonds might have. For example, some bonds can be converted into shares of common stock. As with all bonds there is default risk, which is the risk that the company could go bankrupt and no longer honor its debt obligations.

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RELATED FAQS
  1. What are the risks of investing in a bond?

    The most well-known risk in the bond market is interest rate risk - the risk that bond prices will fall as interest rates ... Read Full Answer >>
  2. What is the relationship between the current yield and risk?

    The general relationship between current yield and risk is that they increase in correlation to one another. A higher current ... Read Full Answer >>
  3. How does the bond market react to changes in the Federal Funds Rate?

    The bond market is highly sensitive to changes in the federal funds rate. When the Federal Reserve increases the federal ... Read Full Answer >>
  4. How do I use the holding period return yield to evaluate my bond portfolio?

    The holding period return yield formula can be used to compare the yields of different bonds in your portfolio over a given ... Read Full Answer >>
  5. What is the relationship between current yield and yield to maturity (YTM)?

    Both the current yield and yield to maturity (YTM) formulas are methods of calculating the yield of a bond. However, these ... Read Full Answer >>
  6. What is a 'busted' convertible bond?

    In finance, a convertible bond represents a hybrid security that offers debt and equity features and risks. While a convertible ... Read Full Answer >>

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