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Bonds in Finance - Definition

A bond is a type of debt or a loan where the borrower could be a bank, an NBFC or the government and the lender or the investor is any individual or a corporation. The borrower is the one who issues the bonds and the lenders are the investors. The investors purchase these bonds to gain intersests on their capital. A bond has an issue date and a maturity date, at which the complete principle value will be returned back to the investor. The rate of interest given over these bonds is also called coupon rate.

Bond Term​






​Principle, Face Value, Par Value

Amount Borrowed​

​Coupon Rate

Interest Rate


Interest Payment


Due Date


Term Until Maturity/Due Date

Yield to Maturity

​Annualized return on Bond Investment

​Market Value

Current Price

Key Takeaways / Features / Characteristics

  • Bonds are rated by credit rating agencies

  • Bonds have a coupon/interest payment frequency, that is annualy, semi annualy, quarterly or monthly

  • Bonds can be secured or unsecured

  • Investors hold bonds till maturity and get their entire principle back

  • Or these bonds can also be traded in secondary markets (Very less liquidity)

  • A bond is basically a loan, which an investor provides to a company or a government

  • The company issuing bonds may also go bankrupt and default on your bonds (however it is uncommon)

  • Secured bonds maturing in near future can also be kept as collateral for taking loans

  • Government bonds are safer and provide less interest whereas corporate bonds have more risk and pay higher interest.

  • Bonds with longer maturity term pay higher interest

  • Bonds is a Capital Market instrument

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