A debt instrument is a loan that the debt instrument holder makes to the debt instrument issuer who may be a government, a corporation, or a financial institution. Similar to a loan, a debt instrument makes periodic interest payments and repays the principal at a stated time. The interest is called coupon.

A debt instrument is characterised by:

• Its face value (also called par value or nominal value): This represents the amount of money the issuer receives for each bond and is used to fix the amount that he will repay upon redemption. This amount is also the basis for calculating interest payments.



• Its coupon rate (also called nominal rate): This is the interest on a bond and represents the compensation paid by the issuer for the time value of money. Interest is generally expressed as a percentage that can be a fixed rate, a floating rate or payable at maturity. The dated date is when interest starts accruing on a new issue, which frequently coincides with the issue date.



• Its maturity: This is the redemption date of the debt instrument. Redemption takes place when the debt instrument is fully amortised. A premium exists when the debt instrument is reimbursed for an amount higher than its face value.



• Its redemption/reimbursement provisions : These refer to the conditions in which the debt instruments may be repaid, for instance by tranches, by equal instalments or in one single payment at maturity.