What is a government bond, and how do they work/function?
In: Economics
Essentially look at it as if the government is taking a loan out from you.
You give the government some amount of money now, and they will pay you back at a specific time in the future. The difference from a conventional loan that you would take is that there is no payment until the entire thing is paid in full.
In addition, the holder of the bond can sell it away to someone else. The bond can be traded on the secondary market so that the person holding it can still get some value out of it before it pays out. Because the value at the end is guaranteed, you never lose money on them (except for trading fees), but the growth is relatively low compared to other investments. It’s a good place to store some investment money for low-risk low-reward plays, but it’ll never pay out as much as the highest risk plays.
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