2.4. Bond Certificates

The principal that is printed on a bond certificate is called its par value. This is the amount the investor lends to the borrower (the issuing entity) when the investor buys the bond, and this is what the investor will be repaid at the bond’s maturity. Corporate bonds are normally issued in $1,000 denominations.

Bearer bonds, also called coupon bonds, are bond certificates that have no owner’s name printed on them and have coupons attached. Anyone who possesses the bearer bond certificate may present a coupon to receive an interest payment or present the bond itself for payment at maturity. Bearer bonds are highly negotiable instruments, and the owner can receive interest payments anonymously without having to declare them at tax time. As a result, the Tax Equity and Fiscal Responsibility Act of 1982 prohibited their further issuance, although many 50-year bonds still remain active. Today anyone depositing coupon