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Bond – Basics of Investing | Investment Options

Straight speaking, a bond is a loan and you are the lender.

So, who is the borrower?

Usually, it’s either the government, state, local municipality or a big company.

These entities need money to operate – to fund the deficit, for instance, or to build roads and finance factories – in turn, they borrow capital from the public by issuing bonds. When bonds are issued, the price you pay is known as its “face value”.

Once you buy it, the issuer promises to pay you back on a specific date – the “maturity date” – at a predetermined rate of interest – the “coupon”.

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