i know this is a broad topic so some leading questions would be
how is price determined
what is maturity
what are different types of bonds
how does the government use the money
Analogies make explanations a lot easier, for I am not smart.
In: Economics
A bond is an agreement offered by an institution (typically banks, companies, or governments) that they will give you money in the future on a schedule if you buy it now.
If Ford wants 1Million dollars today, they could sell 1.1 Million worth of bonds due in a year. You give them 1 Million today and they’ll give you 1.1 Million next year. These are open to investors so whoever will pay the most for the bond will receive it, thus there is a bond market and an interest rate associated.
Bonds can be traded between people before they are due. Bonds can also pay smaller amounts before the final lump sum called coupons.
Bonds are safer than stocks and are treated like loans. If the company goes bankrupt, they will liquidate their assets (sell everything) and use that money to pay back their loans and bondholders first.
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