- A bond is an instrument of loan to an investor to lend money to an organization such as a government or corporation for a promise to pay interest on a given sum that it would later repay.
- Bond is a popular means to raise money from different projects for government and corporate organizations.
How they work?
- Money is lent by an investor to the bond issuer with a promise by the latter to return it along with interest at a given date.
Different aspects of bonds
- Safety:
- Bonds have always been considered safe instruments of investment, especially government-bond issues.
- Credit rating:
- Each bond has an individual credit rating.
- Interest rate:
- Bonds carry a fixed or variable rate of interest.
- Bond yield:
- This yield is calculated by the division of the coupon amount and the price.
- Debenture:
- They are like bonds, except they are issued by a private company and not backed by collateral or any physical things.
