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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

A security representing the debt of the company or government issuing it. When a company or government issues a bond, it borrows money from the bondholders; it then uses the money to invest in its operations. In exchange, the bondholder receives the principal amount back on a maturity date stated in the indenture, which is the agreement governing a bond's terms. In addition, the bondholder usually has the right to receive coupons or payments on the bond's interest. Generally speaking, a bond is tradable though some, such as savings bonds, are not. The interest rates on Treasury securities are considered a benchmark for interest rates on other debt in the United States. The higher the interest rate on a bond is, the more risky it is likely to be.

There are several different kinds of bonds. The most basic division is the one between corporate bonds, which are issued by private companies, and government bonds such as Treasuries or municipal bonds. Other common types include callable bonds, which allow the issuer to repay the principal prior to maturity, depriving the bondholder of future coupons, and floating rate notes, which carry an interest rate that changes from time to time according to some benchmark. Along with cash and stocks, bonds are one of the basic types of assets.

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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.

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Bond. Bonds are debt securities issued by corporations and governments.

Bonds are, in fact, loans that you and other investors make to the issuers in return for the promise of being paid interest, usually but not always at a fixed rate, over the loan term. The issuer also promises to repay the loan principal at maturity, on time and in full.

Because most bonds pay interest on a regular basis, they are also described as fixed-income investments. While the term bond is used generically to describe all debt securities, bonds are specifically long-term investments, with maturities longer than ten years.

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bond

A certificate that provides evidence of a debt or obligation.

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Bond

What Does Bond Mean?

A debt investment in which an investor lends money to an entity (corporate or government) that borrows the funds for a defined period at a fixed interest rate. Bonds are used by companies, municipalities, states, and U.S. and foreign governments to finance a variety of projects and activities. Bonds commonly are referred to as fixedincome securities and are one of the three main asset classes, along with stocks and cash equivalents.

Investopedia explains Bond

The indebted entity (issuer) issues a bond stipulating the stated interest rate (coupon) to be paid and a date when the loaned funds (bond principal) are to be returned (maturity date). Interest on bonds usually is paid every six months (semiannually); bond categories include corporate bonds, municipal bonds, and U.S. Treasury bonds, notes, and bills (“Treasuries”). Two features of a bond—credit quality and maturity—are the principal determinants of the interest rate of a bond. Bond maturities can range from a 90-day Treasury bill to a 30-year government bond. Corporate and municipal bonds typically go out 3 to 10 years.

Related Terms:
• Callable Bond
• Convertible Bond
• Corporate Bond
• Junk Bond
• Yield to Maturity

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Bond

A note obliging a corporation or governmental unit to repay, on a specified date, money loaned to it by the bondholder. The holder receives interest for the life of the bond. If a bond is backed by collateral, it is called a mortgage bond. If it is backed only by the good faith and credit rating of the issuing company, it is called a debenture.