Tip & How-To about Finance
Even if you don't know much about financial issues, don't worry. I'll explain what bonds are to you in a really simple way.
Bonds sound complicated but really it's all about borrowing and lending money.
Governments and companies need money - it's a simple fact and to get funds they need they need to borrow from places other than just the bank. It's common practice to raise money by issuing bonds to the public financial market.
What does this actually mean?
Public investors (ie could be you or I), lend some of their money capital ie savings to these companies or governments.
You then become the lender and the bonds are sold by an organization that sorts it all out, and they are called the issuer.
In return for lending their capital, the issuer pays the lender something for it. Usually this is done through interest payments that are usually pre agreed.
A date is fixed by which the issuer has to return the money to the lender. This is known in the financial world as the maturity date.
Bonds are a fairly low risk way of enjoying fixed income securities, because you know in advance how money you'll make in addition to the money returned to you after the fixed period of time passes.
Posted by bernie on
Oct 22, 2014 | Finance
Oct 06, 2012 | Finance