What is a bond?


I really don’t understand and it’s getting embarrassing

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It’s essentially a loan to a company.

Let’s say a company needs some money. They will sell a bond for $100, with the promise that they will pay back $110 dollars in a year (or however long the bond is).

You want a cup of juice really bad and you see I have a whole carton of juice.

You tell me if I give you a cup of juice then you will give me one cup of juice + one extra cup of juice as soon as you grow up and mature.

I agree and give you one cup of juice.

X amount of years later, you come back and pour me 2 cups of juice.

Good example is war bonds.

Government NEEDS funds NOW for a war. In order to get it they tell the citizens to buy war bonds for let’s say 5 dollars a piece with a promise that on X date (usually a few years) when the bond is mature the citizen can sell it back to the government for $10.00 each.

A bond is a unit of debt that is issued by an investment bank or a government entity to borrow from the public sector. Your city can issue bonds to build a hospital or a park. A company can issue bonds to expand or improve their business. The federal government borrows all the time to pay for expenditures in excess of their revenues, this is what is known as “the defect”. Investment banks rate the credit or expected ability to repay of various borrowers and this is how their borrowing rates are determined. You may purchase a bond usually for a par (issue price) if $1,000 and receive regular interest payments. So let’s say you buy a 10 year bond at 4%, you may expect to get paid $20 twice a year for 10 years and then your original investment ($1,000) will be refunded. You can often sell the bond as well for a loss or gain depending on a number of factors that I won’t touch on here. I hope this helps.

There’s different kinds of bonds. Some of bonds are financial instruments that are used to raise capital, such as lease revenue bonds. Other types of bonds are a promise to perform on behalf of someone else, for example: a performance bond is a promise to complete work under a contract, a payment bond is a promise to pay subcontractors if the general contractor doesn’t, and employment bonds protect against losses causes by an employee.

A bond is also money paid to the court to ensure honest and faithful performance of a court ordered duty.


It’s a loan basically. The organization that sells the bonds (government or company typically) gets the money today, promised to pay the stipulated annual interest, and return the principal at the maturity date. So a bond might be sold in $1000 increments, paying 5% annual interest for 10 years. Than means for each $1000 increment bought, the loan buyer gets $50 each year for 10 years, and then gets their $1000 back.

A bond is a financial instrument that entitles the owner to repayment and interest.

Bonds are typically issued to raise funds by a government or a corporation. Doing so allows a large amount of money to borrowed from a large number of sources, without having to bargain with a single powerful financial company.

Bond issuers can often get better rates through bonds than through single-party lenders because bonds are often in high demand among investors. Bonds are typically seen as a low risk investment, especially when issued by a government or a large corporation.