Business and Personal Finance Dictionary

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• BULLET BOND
  
  Definition: A Bond that Amortizes (q.v.) fully on a single date. Its cash flows consist of regular coupon payments of interest and a final repayment of principal. Example: An ordinary, 30-year, noncallable Treasury bond with a semiannual coupon. Application: A Bullet Bond is a commonplace way of raising capital. Pricing: A Bullet Bond is a portfolio of Zero Coupon Bonds (q.v.), so its value is the value of the portfolio. Risk Management: A common way to measure a fixed income portfolio’s risk is by its Duration (q.v.) or DV01 (q.v.), and its Convexity (q.v.). Consequently, one might combine a Bullet Bond with other fixed income instruments in a portfolio, in an effort to control the portfolio’s Duration and Convexity. Comment: When a layman thinks of a bond, this is the bond.
  
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