Tuesday, February 20th 2018

Bond


Bond Meaning:
A debt security. In other words, an arrangement where the issuer borrows a sum of money from the buyer, and must repay the sum according to certain rules that are stated in the bond. Bonds will usually state when the sum is to be repaid (this is the ‘maturity date’) and any interest payable until then (this is the ‘coupon rate’).

Bond Example:
A bond issue is really no more than an invitation to be loaned money on certain terms. Bonds are issued by companies to finance projects, and by governments to finance expenditure. They can differ wildly in their terms to maturity, rates of interest, issue price, and face value (the issue price and the face value need not be the same, though they usually are).

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