Anatomy of a Bond
Everything you need to know before you buy an individual bond.
Who's the issuer?
Coca-Cola Enterprises is the largest bottler and distributor of Coke products. Not to be confused with the Coca-Cola Co., which develops beverages and sells syrups to bottlers, Coca-Cola Enterprises generated sales of $22 billion in the four quarters that ended last September.
What's the interest?
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This issue pays 7.125% on a face value of $1,000, or $71.25 a year per bond, in semiannual payments.
| Row 0 - Cell 0 | How Well Do You Know Bonds? |
| Row 1 - Cell 0 | Best Buys in Bonds |
| Row 2 - Cell 0 | 5 Caveats When You Buy Bonds |
What does it cost?
Think of the quoted price -- 111.707 -- as a percentage of the bond's $1,000 face value. Each bond sells for $1,117 -- at a premium -- because the 7.125% interest coupon is better than the going rate on similar bonds. Brokerage commissions are usually built into the price of a bond. But Fidelity, on whose Web site we found this IOU, tacks a $1-per-bond commission on top of the quoted price.
When does it mature?
As long as Coca-Cola Enterprises doesn't go bust, it will repay bondholders on August 1, 2017.
What does it earn?
The yield to maturity, which is 5.40%, sums up the total return you'll earn on your investment of $1,117 per bond if you hold until maturity. This figure takes into account all the cash payments you'll receive over the life of the bond and the loss of the $117-per-bond premium when you receive the bond's $1,000 face value at maturity.
What's the quality?
A single-A credit rating is solid but not bulletproof. It signals that the company should be able to repay its debts under current business conditions, but it could run into problems if the economy or its industry weakens. The firm's $9.4 billion in total debt works out to a debt-to-capital ratio of 0.5, which is reasonable for its industry. Keep in mind that bond raters are not infallible.
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