Definition
A bond is a debt instrument where an investor loans money to an entity (corporate or government) that borrows the funds for a defined period at a fixed or variable interest rate. Bonds pay periodic interest (coupon) and return principal at maturity. They're generally considered lower risk than stocks.
Example
You buy a 10-year Treasury bond with a 4% coupon and $1,000 face value. You receive $40 annually in interest and $1,000 back at maturity.
FAQ
What is Bond?
A fixed-income security representing a loan made by an investor to a borrower.
Why is Bond important?
Bond helps investors evaluate fixed income and make more informed decisions.
Related Terms
Coupon Rate
The annual interest rate paid on a bond based on its face value.
Yield to Maturity (YTM)
The total return anticipated if a bond is held until maturity.
Face Value (Par Value)
The nominal value of a bond that will be repaid at maturity.
Maturity Date
The date when a bond's principal is repaid and interest payments cease.