Bonds (Fancy certificate-looking papers that apparently pay you money)

Question

I have no idea how they work

In: 2

Answer 1

Bonds are pretty simple in theory. Lets say I sold you a bond. You would give me, say, $100 and in exchange I would give you a piece of paper that says “on X date, StupidLemonEater will pay qocktard $100 plus Y% interest.” It’s basically a formalized version of an IOU, except that you could also sell the bond to someone else and then I would have to repay them instead of you.

Most government debt exists in the form of bonds which anyone can buy from the treasury. E.g. when you hear that the US is $30T in debt, most of that debt is to private citizens and companies which own bonds.