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Bond
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Bonds are Debt and are issued for a period of more than one year.
National governments, Local governments, water districts, companies and many other types of institutions sell bonds. When an investor buys bonds, he or she is lending money. The seller of the Bond agrees to repay the principal amount of the loan at a specified time. Interest-bearing bonds pay Interest periodically.
A Debt investment in which an investor loans money to an entity (corporate or governmental) that borrows the funds for a defined period of time at a fixed Interest rate.
Bonds are used by companies, municipalities, states and U.S. and foreign governments to finance a variety of projects and activities. Commonly referred to as fixed-income securities and is one of the three main asset classes, along with stocks and Cash equivalents.
The indebted entity (issuer) issues a Bond that states the Interest rate (Coupon) that Will be paid and when the loaned funds (Bond principal) are to be returned (Maturity Date). Interest on bonds is usually paid every six months (semi-annually). The main categories of bonds are corporate bonds, municipal bonds, and U.S. Treasury bonds, Notes and bills, which are collectively referred to as simply "Treasuries".
Two features of a Bond - credit quality and duration - are the principal determinants of a Bond's Interest rate. Bond maturities Range from a 90-day Treasury bill to a 30-year government Bond. Corporate and municipals are typically in the three to 10-year Range.
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