It is a fixed income investment in which investor loans money any kind of entity, it can be a governmental entity or a corporate entity who borrows the fund for a particular time period at a variable or fixed interest rate.
These are used by companies, municipalities, states and sovereign governments to raise money and finance a variety of projects and activities.
These are commonly known as Fixed income securities. many of the bonds are being traded on exchanges.
HOW DOES BONDS WORK?
When companies or other entities need to raise money to finance new projects, maintain ongoing operations, or refinance existing debts, they may issue bonds directly to investors instead of obtaining loans from a bank.The issuance price of a bond is typically set at par.
The issuer issues a bond that contractually states the interest rate that will be paid and the time at which the loaned funds must be returned. The interest rate is the return that bondholders earn for loaning their funds to the issuer.
FEATURES
- credit quality
- duration
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