A bond is basically another term for a loan that companies, governments, and similar entities offer as a way to earn capital. Think of it as a fancy “IOU” between you and whoever you purchase the bond from. You’re indebted to the owner of the bond until the end date, by which you have to pay back the principal balance of the loan plus interest.
Example: One of the best examples of a bond is a federal government bond. They’re called treasury bonds, and they earn periodic interest until the end of their term (between 10 and 30 years). If you own a treasury bond, it’ll pay out at a coupon rate, which can be around 1.25%. Depending on how much you purchased the bond for, you’d receive 1.25% for every $1,000 of the bond that you own.

Sign up for course updates!

* indicates required
What topic(s) are you interested in?

By subscribing, you agree to our Privacy Policy and Terms of Use. You can unsubscribe at any time by contacting onomy or using the unsubscribe link.