What's a bond? (2024)

FAQs

How do you explain what a bond is? ›

Bonds are investment securities where an investor lends money to a company or a government for a set period of time, in exchange for regular interest payments. Once the bond reaches maturity, the bond issuer returns the investor's money.

A bond is a fixed income instrument that represents a loan made by an investor to a borrower (typically corporate or governmental)

U.S. Treasury bonds are considered one of the safest, if not the safest, investments in the world. For all intents and purposes, they are considered to be risk-free. (

Two features of a bond—credit quality and time to maturity—are the principal determinants of a bond's coupon rate. If the issuer has a poor credit rating, the risk of default is greater, and these bonds pay more interest. Bonds that have a very long maturity date also usually pay a higher interest rate.

A bond is simply a loan you make to a corporation, municipality, or government agency. The borrower gets the cash it needs, while you, the lender, earn interest for the term of the loan. For the use of your money, the borrower promises to pay you a specific interest rate on a regular basis for a set period of time.

Bonds are loans that investors make to a corporation or a government body in exchange for regular interest payments and the return of principal at a future date. Companies issue corporate bonds to raise money for capital expenditures, operations and acquisitions.

transitive. To confine or tie up (someone) with a rope, bond, etc.; to bind, fetter.

An attraction between atoms that allows the formation of chemical substances that contain two or more atoms.

In finance, a bond is a type of security under which the issuer (debtor) owes the holder (creditor) a debt, and is obliged – depending on the terms – to provide cash flow to the creditor (e.g. repay the principal (i.e. amount borrowed) of the bond at the maturity date as well as interest (called the coupon) over a ...

For example, if a company wants to build a new plant, it may issue bonds and pay a stated rate of interest to investors until the bond matures. The company also repays the original principal. Unlike buying stock in a company, buying a corporate bond does not give you ownership in the company.

What is a bond best defined as? ›

Bonds are issued by governments and corporations when they want to raise money. By buying a bond, you're giving the issuer a loan, and they agree to pay you back the face value of the loan on a specific date, and to pay you periodic interest payments along the way, usually twice a year.

Short-term bond funds invest primarily in corporate and other investment-grade U.S. fixed-income securities and generally have durations¹ of one to three and a half years.

By Definition, “A Bond is a fixed income instrument that represents a loan made by an investor to a borrower.”

Bonds are an investment product where you agree to lend your money to a government or company at an agreed interest rate for a certain amount of time. In return, the government or company agrees to pay you interest for a certain amount of time in addition to the original face value of the bond.

Bonds can provide a means of preserving capital and earning a predictable return. Bond investments provide steady streams of income from interest payments prior to maturity.

Term bonds are bonds from a single issue that all mature on the same date. On the maturity date of term bonds, the face value (principal) must be repaid to the bondholders. Call provisions within term bonds stipulate characteristics where issuers can redeem bonds from investors before the maturity date.

Bond is a fixed-income instrument that represents a loan from an investor to a borrower. It is a contract between the investor and the borrower, where the borrower uses the money to fund its operation and the investors receive interest on the investment.

A debt security that typically pays an investor a fixed rate of return for a specified period of time.