Fixed rate bonds are what the name implies, they provide
a fixed coupon interest payment at each period (monthly, quarterly,
semi-annually or annually) for a certain # of years up until maturity.
Upon maturity, fixed rate bonds pay back the entire original principal
amount. Go here to learn more about bond debt securities. (View
Full Tutorial)
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Imagine you borrow $10,000 now at a rate of 12% interest
annually, for the next 30 years. You will therefore pay 0.12 x
$10,000 = $1200 per year for the next 30 years. At the end of
the 30 years, you will also pay back the original $10,000 (principal
amount). What is the total amount you have paid?
$1200 per year x 30 years = $36000 (interest payments)
$10,000 (original principal)
Total payments = $36,000 + $10,000 = $46,000
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