Final answer:
The terms and features of a bond are detailed in the indenture, which is a comprehensive legal document that acts as the contract between the bond issuer and the bondholders.
Step-by-step explanation:
A bondholder can find the details regarding the terms and features of her bond from the indenture. The indenture is a formal debt agreement that describes important details like the interest rate, maturity date, and other terms of the bond. It's a contract between the bond issuer and the bondholders, and it contains all the specifics that govern the bond issue.
Bonds are a financial instrument used by various entities, such as firms, governments, and municipalities, to borrow money. They operate similarly to bank loans in that they require the issuer to pay back the borrowed amount with interest. However, while bank loans involve convincing a bank to lend money, issuing bonds requires attracting multiple separate investors as bondholders.
For instance, when interest rates are at 5% and a bond with a par value of $1,000 is issued at an annual coupon of 5%, it pays the bondholder $50 annually. Should interest rates drop, the bond becomes more appealing to investors, who will purchase it until the return on the bond aligns with the new market rate. Conversely, if interest rates increase, the attractiveness of the bond declines.