BOND FINANCE .December 30, 2020
In finance, a bond is an instrument of indebtedness of the bond issuer to the holders. The most common types of bonds include municipal bonds and corporate bonds. Bonds can be in mutual funds or can be in private investing where a person would give a loan to a company or the government.
The bond is a debt security, under which the issuer owes the holders a debt and (depending on the terms of the bond) is obliged to pay them interest (the coupon) or to repay the principal at a later date, termed the maturity date. Interest is usually payable at fixed intervals (semiannual, annual, sometimes monthly). Very often the bond is negotiable, that is, the ownership of the instrument can be transferred in the secondary market. This means that once the transfer agents at the bank medallion stamp the bond, it is highly liquid on the secondary market.
The yield is the rate of return received from investing in the bond. It usually refers either to:
- The current yield, or running yield, which is simply the annual interest payment divided by the current market price of the bond (often the clean price).
Bond certificate for the state of South Carolina issued in 1873 under the state’s Consolidation Act.
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