Bonds are fixed-income securities issued by corporations, municipalities, and governments to raise capital. They function as a form of debt financing, where the issuer borrows funds from investors and agrees to make periodic interest payments until the bond reaches maturity. The bondholder receives the principal amount upon maturity.
In finance, bonds refer to debt instruments that provide a structured way for organisations to raise capital while offering investors a fixed return. These instruments are used by governments and corporations to fund large-scale projects, infrastructure developments, or business expansions. Investors purchasing bonds lend money to the issuer in exchange for fixed interest payments over a predetermined period.
Bonds have a set face value, which is the amount the issuer agrees to repay at maturity. Investors earn returns through coupon payments, which are fixed or variable interest payments made at regular intervals. Bond prices fluctuate based on market interest rates, credit ratings, and economic conditions. If interest rates rise, bond prices typically decrease, and vice versa.
Why Buy Bonds?
A financial bond is a fixed-income instrument issued by governments or corporations to raise capital. When you buy a bond, you are essentially lending money to the issuer in exchange for periodic interest payments and the return of the principal amount at maturity. Unlike stocks, bonds do not provide ownership in a company but offer steady income and can help balance the risks of a volatile investment portfolio.
