What is a bond?

A bond is a formal contract to repay borrowed money with interest at fixed intervals. With the exception of government issues, the amount being borrowed is secured against specific assets. Bonds are usually issued at face value, also known as par value. The buyer of the bond is paid interest (also known as the coupon rate) usually semi-annually. Upon maturity, the buyer of the bond expects to be repaid their original investment at face value or par.

Last updated July 2, 2020