Bonds
Definition
Bonds are debt securities issued by governments, municipalities, corporations, or other entities to raise capital. When you purchase bonds, you are essentially lending money with the expectation that it will be repaid with interest over time.
Analogy
Think of bonds as loans given by individuals to others. Just like when you lend money to someone with an agreement that they will pay it back with interest, buying bonds means lending money to organizations who promise repayment with interest.
Related terms
Maturity Date: The date when the principal amount of a bond is due to be repaid.
Coupon Rate: The fixed interest rate paid on a bond, usually expressed as a percentage of its face value.
Credit Rating: An evaluation of the creditworthiness and risk associated with an issuer of bonds or other debt securities.
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