Can You Define A Bond?

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Can You Define A Bond?

2 Answers

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Answer 1

What's the nature of a bond? Well bonds are basically a sort of securities which earn you interest and capital in the end.

A bond has a face value which is the price of the bond also.Some times a bond may be sold above the face value called bond sold at premium and it can happen that bonds might sell below the face value called bonds sold at discount.

A bond has a maturity period, five years or ten or any number of years in which the company can repay and need capitals for.

A bond has a fixed interest which the company repays annually, semi annually, quaterly and rarely monthly as well.The company keeps paying the interest till its maturity and when the maturity is completed, the company repays the face value amount plus last interest payment.

A bond for general public is a source of investment and for companies source of generating funds for their requirement.

That's all for bond.

Answer 2

A bond is nothing but a debt security certificate where the issuer promises repaying owes to the holder at a later date with the entire interest amount, cumulated through a defined rate of interest, along with the principal. Such bonds need to be matured over a specified time. On maturity, they are to be produced to get the promised amount. The terms and conditions, related to the risks and other financial liabilities, are given at the time of issuing bonds.

Generally, maturity period of bonds are kept for 10 years, but a period of even 30 to 50 years does also exist. Debt for less than 10 years is a actually note or bill. Interest guaranteed through bonds are called coupon, payable at an interval as agreed upon by the parties. Though, the maturity period for a bond is supposed to be more than 10 years but this distinction of timeframe is not equally met everywhere. Due to its lengthy maturity period, it is considered as the high-risk investment against the bills and notes. Unlike the stockholders, bondholders do not own any part of the company. They are simply the lender.

Starting from very small to large, any organisation can issue bonds due fulfilling the requisite regulations. The main constituent parts of the bond are its nominal value, principal or face amount and the issue price. These bonds are available as Bonds by coupon, fixed rate bond, zero coupon bond, inflation-indexed bond, perpetual bond, etc.