Investment term of the day: bond
A bond is like an IOU. When a company (or indeed, government) wants to raise funds, it may well look to issue bonds. Investors buy the bonds (i.e. lend money), and in return, receive a note binding the company to a fixed agreement.
Under this agreement, the company is obliged to pay regular interest at a predetermined rate (called the coupon) to each of the bondholders (lenders) over a fixed period, after which, the initial sum of money (called the principal) is repaid.
Bonds are often called debt investment, and are often regarded as more secure than equity investment.
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