from infrastructure to social programs. The problem large organizations run into is that they typically need far more money than the average bank can provide. The solution is to raise money by issuing bonds (or other debt instruments) to a public market.
Really, a bond is nothing more than a loan of which you are the lender. The organization that sells a bond is known as the issuer. You can think of it as an IOU given by a borrower (the issuer) to a lender (the investor).
The interest rate is often referred to as the coupon. The date on which the issuer has to repay the amount borrowed, known as face value (also known as the par value or principal), is called the maturity date. Bonds are known as fixed-income.
When a bond's price trades above the face value it is said to be selling at a premium. When a bond sells below face value, it is said to be selling at a discount.
When bond investors refer to yield, they are usually referring to yield to maturity.
Types of Bonds
- Government Bonds
- Municipal Bonds
- Corporate Bonds
- Zero Coupon Bonds
- Bonds are just like IOUs. Buying a bond means you are lending out your money.
- Stocks are equity; bonds are debt.
- Issuers of bonds are governments and corporations.
- A bond is characterized by its face value, coupon rate, maturity, and issuer.
- Yield is the rate of return you get on a bond.
- When price goes up, yield goes down and vice versa.
- InvestingInBonds.com
- http://www.investopedia.com/university/bonds/
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