A bond is a fixed income security that denotes the loan taken by the issuer from the investor that is repayable with interest at predefined period.
Bonds are generally issued by companies, government and banks which are purchased investors. These instruments are considered to be more conservative investments as compared to stocks, as they pays regular interest payments to investors, and returns the full principal amount at the time of maturity. Bonds are contracts where one party lends money to another on predetermined terms.
Features commonly associated with Bonds
- Interest or Coupon payments
- Periodicity of interest payments
- Tenure of instrument
Interest or Coupon Payments
Interest rate is the amount payable to the bond investor as compensation for the amount lend to the issuer of the bond. Interest rate is typically expressed as a percentage of the principal amount.