Bond

Short Answer
A bond is a fixed-income investment where an investor loans money to an entity (corporate or governmental) for a defined period at a fixed interest rate.

Bond

Definition

A bond is a debt security issued by corporations, municipalities, states, and governments to raise capital. When an investor purchases a bond, they are essentially lending money to the issuer in exchange for periodic interest payments and the return of the bond's face value (principal) at maturity. Bonds are often referred to as fixed-income securities because they provide regular interest payments, known as coupon payments.

Bonds can vary widely in terms of maturity (short-term, medium-term, long-term), credit quality (investment-grade, high-yield), and type (government, municipal, corporate). The interest rate (coupon rate) and creditworthiness of the issuer determine the bond's attractiveness to investors. Bonds are a key component of diversified investment portfolios, providing income and reducing overall portfolio risk compared to stocks.

Bond

Examples

  1. U.S. Treasury bonds, issued by the federal government and considered one of the safest investments.
  2. Corporate bonds, issued by companies like Apple or General Electric to fund operations or expansions.
  3. Municipal bonds, issued by state and local governments to finance public projects like schools and infrastructure.

Bond

Further Reads

People also viewed:

Browse more terms

Credit Crunch

A credit crunch is a financial situation where there is a sudden and severe reduction in the availability of loans or credit from banks and other lenders.

Cost-Push Inflation

Cost-push inflation occurs when the overall price levels rise due to increased costs of production, such as wages and raw materials.

Corporate Raiders

Corporate raiders are investors who buy a significant stake in a company to influence its management and policies, often aiming to increase its stock price for a profit.