Bond: A bond is a loan to a company or a government agency or municipality that is repaid with interest. A bond is a financial instrument or security that represents a debt obligation. It is a way for entities, such as governments, municipalities, corporations, or other organizations, to borrow money from investors. When you buy a bond, you are essentially lending money to the issuer of the bond.
Bonds have a specified maturity date, which is the date when the issuer is obligated to repay the principal amount (the initial investment) to the bondholder. In the meantime, the bondholder receives periodic interest payments, usually at a fixed interest rate called the coupon rate. The interest payments represent the compensation to the bondholder for lending their money.
Bonds are typically traded in the financial markets, allowing investors to buy and sell them before they mature. The price can fluctuate based on various factors, including changes in interest rates, creditworthiness of the issuer, and prevailing market conditions. If you hold a bond until its maturity, you will receive the face value or principal amount back.
Bonds are considered relatively safer investments compared to stocks because they offer a fixed income stream and the return of the principal amount at maturity. They are often used by individuals and institutional investors seeking a more predictable and stable investment option. Bonds also play a crucial role in financing projects and operations for governments and corporations. Click this link to watch videos about bonds on finStream: https://www.finstream.tv/videos/bonds/