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In finance, a bond is a type of security under which the issuer owes the holder a debt, and is obliged – depending on the terms – to provide cash flow to the creditor (e.g. repay the principal (i.e. amount borrowed) of the bond at the maturity date and interest (called the coupon) over a specified amount of time. [1])
The bond can be redeemed directly with the government, or in the case of a paper bond, with the government or a financial institution. U.S. savings bonds can be purchased directly from the U.S ...
Put simply, a bond is an individual debt instrument, while bond funds invest in a collection of individual bonds. A bond is a contract between a borrower and a lender.
The terms on which investors will finance the company will depend on the risk profile of the company. The company can give up equity by issuing stock or can promise to pay regular interest and repay the principal on the loan (bonds or bank loans). Fixed-income securities also trade differently than equities.
Bond funds offer diversification, as they invest in multiple bonds, reducing the risk associated with any single bond defaulting. Bond funds also offer a wide range of options for investors.
A company may use various kinds of debt to finance its operations as a part of its overall corporate finance strategy. A term loan is the simplest form of corporate debt. It consists of an agreement to lend a fixed amount of money, called the principal sum or principal, for a fixed period of time, with this amount to be repaid by a certain date.
The issuer’s financial stability. Bond prices move when investors perceive a change in the issuer’s ability to meet the bond’s obligations, or its credit quality deteriorates. Often this ...
It is known as a term deposit or time deposit in Canada, Australia, New Zealand, and as a bond in the United Kingdom. A fixed deposit means that the money cannot be withdrawn before maturity unlike a recurring deposit or a demand deposit. Due to this limitation, some banks offer additional services to FD holders such as loans against FD ...