What are Bonds?

EnclaveFX Ltd
Jan 16, 2023
invoices A bond is a financial instrument (debt security) in which an investor loans money: typically Government, Municipality, Corporation, or other organization known as the Issuer.

In exchange for loaning the funds, the issuer promises to repay the principal amount of the loan at a specific maturity date and to make periodic interest payments to the bondholder.

The interest rate at which the issuer borrows the funds is known as the coupon rate, and the bond is generally issued at face value, which is also known as the principal amount or par value.


When an investor buys a bond, they essentially lend money to the issuer, and the issuer is obligated to repay the bondholder's principal and interest at the specified terms.

Bonds are considered less risky investments than stocks, but they typically offer a lower return.