What are Bonds?
Bond is a fixed-income instrument that represents a loan from an investor to a borrower. It is a contract between the investor and the borrower, where the borrower uses the money to fund its operation and the investors receive interest on the investment.
Bonds are high-security debt instruments that fall under the fixed income asset class. It enables an entity to raise funds to fulfil the capital requirement for funding various projects. It is a debt that borrower’s avail from individuals for a specified tenure.
These are issued by the government, corporates, municipalities, states, and other entities to fund their projects. These bonds have a maturity date and when that is attained, the issuer needs to pay back the amount along with a part of the profit to the investor.
With this understanding of Bonds meaning in finance, let’s take a look at the features and working of this debt category.