bond
A bond is evidence of a debt in which the issuer promises to pay the bondholders a specified amount of interest and to repay the principal at maturity.
A debt instrument issued by a company, city, or state, or the U.S. government or its agencies, with a promise to pay regular interest and return the principal on a specified date.
Debt security that obligates the issuer to pay the holder interest during the term of the bond, with some exceptions, and the principal at or before maturity.
Bonds are
debt and are
issued for a period of more than one year. The U.S. government, local governments, water districts, companies and many other types of institutions sell bonds. When an
investor buys bonds, he or she is lending money. The seller of the bond agrees to repay the
principal amount of the loan at a specified time. Interest-bearing bonds pay
interest periodically.
A contractual obligation to fulfill a promise. See also Municipal Bond.
A debt security that represents the obligation of the issuer to pay interest to the creditor or bond holder and return the principal at maturity. Bonds backed by collateral are termed secured while those that are not secured are called debentures. A sinking fund bond obligates the issuer to set aside some of its earnings to retire bonds periodically. A bond is usually identified by its maturity date and its coupon rate, which is the interest rate stated on the bond. The price of the bond is equal to its face value when issued, which is called the par price. After that, the price fluctuates in the market. Bonds selling above original price are selling at a premium to par while those selling below original price are selling at a discount to par. Prices vary inversely with interest rates, as the prices of old bonds must adjust so that their current yield will stay competitive with those of newly issued bonds. A bond does not represent ownership. See Baby Bond, Callable, Junk Bond, Municipal Bond, US Gov't Issues, Zero Coupon Bond, Convertible Bond, Corporate Bond.
