What are Bonds? Definition
Bonds are a way for a company or individual to borrow money from an investor or group of investors.
Bonds are issued by many different types of bodies in order to raise funds that they need to operate. In exchange for loaning money to the organization that issues the bond, the investor sees a return on their money when the bond comes due.
Additional Information – Bonds Definition
Bonds can also be traded just like stocks.
One of the reasons that bonds are secure is that they represent money that is owed.
So, if the issuer of a bond, for some reason, is going under, then one of the first orders of business is to repay the holders of its bonds.
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In the situation of insolvency, this is preferable to being a shareholder.
In a bankruptcy case, bondholders get paid first before shareholders.
In such cases, there are normally no funds left over for shareholders, which simply leaves you as one of many investors (owners) of a company that has failed.
Types of Bonds
- Fixed rate bonds
- Fidelity bonds
- Investment bonds
- Income bonds
- High interest Bonds
- Government bonds
- Bank bonds
- 1 year bonds
- Convertible bonds
- … and many more
There are many different types of bonds.
Bonds are issued by a wide variety of agencies and companies and can be structured in a number of ways.
They mature on different timelines, pay out interest at points throughout the course of their life or only at maturity, and may have fixed or fluctuating interest rates.
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