bond

Bond

A debt investment with which the investor loans money to an entity (company or government) that borrows the funds for a defined period of time at a specified interest rate.

Notes:

The indebted entity issues investors a certificate, or bond, that states the interest rate (coupon rate) that will be paid and when the loaned funds are to be returned (maturity date). Interest on bonds is usually paid every six months (semiannually). The main types of bonds are the corporate bond, the municipal bond, the treasury bond, the, treasury note, treasury bill, and the zero-coupon bonds.

The higher rate of return the bond offers, the more risky the investment. There have been instances of companies failing to pay back the bond (default), so, to entice investors, most corporate bonds will offer a higher return than a government bond. It is important for investors to research a bond just as they would a stock or mutual fund. The bond rating will help in deciphering the default risk.

See also: Bond Ladder, Bond Rating, Bond Swap, Brady Bond, Callable Bond, Convertible Bond, Corporate bond, Coupon, Coupon Bond, Discount Bond, Eurobond, Housing Bonds, Indenture, Junk Bond, Maturity, Mello Roo's, Municipal bond, Obligor, Premium bond, Put Bond, Tax Anticipation Notes (TAN), Treasury Bill, Treasury bond, Treasury note, Yield to Maturity, Zero-coupon bonds

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Bond

Bonds are debt and are issued for a period of more than one year. The US government, local governments, water districts, companies and many other types of institutions sell bonds. When an investor buys bonds, he or she is lending money. The seller of the bond agrees to repay the principal amount of the loan at a specified time. Interest-bearing bonds pay interest periodically.

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bond

1. A long-term promissory note. Bonds vary widely in maturity, security, and type of issuer, although most are sold in $1,000 denominations or, if a municipal bond, $5,000 denominations.

2. A written obligation that makes a person or an institution responsible for the actions of another.