Bond

Quick Answer

A bond is a fixed-income investment where an investor loans money to an entity (corporate or governmental) that borrows the funds for a defined period at a fixed interest rate.

Definition

A bond is a fixed-income investment where an investor loans money to an entity (corporate or governmental) that borrows the funds for a defined period at a fixed interest rate.

Explanation

Bonds are a key component of diversified portfolios, providing income and stability. The bond market is larger than the stock market.

Example

A $1,000 bond with a 5% coupon pays $50 per year in interest. If held to maturity, the investor receives the full $1,000 back.

Frequently Asked Questions

What is Bond?

A bond is a fixed-income investment where an investor loans money to an entity (corporate or governmental) that borrows the funds for a defined period at a fixed interest rate.

How does Bond work?

Bonds are debt securities that pay regular interest (coupon) payments and return the face value at maturity. Government bonds are considered low-risk, while corporate bonds carry higher risk and offer higher yields. Bond prices move inversely to interest rates — when rates rise, bond prices fall.Bonds are a key component of diversified portfolios, providing income and stability. The bond market is larger than the stock market.