How do bonds work?
For you, the lender, a bond is a kind of investment, like a stock. The difference is that stocks aren’t loans. Rather, stocks represent partial ownership in a company, and the returns represent a share in profits. For that reason, stocks are riskier and more volatile — they closely reflect the success of a company. Bonds, on the other hand, often have a fixed interest rate. Some bonds, however, are floating-rate bonds, meaning their interest rates adjust depending on market conditions.
A bond is a type of loan which business and corporaton issue out to raise money for their organization.These bonds are issued out so that individuals or even corporations can buy them.Buying this bond means borrowing money to the organization in which they promise to pay you interest for the length of the bond.
Related Questions
- When to Purchase U.S. Savings Bonds So if the interest rates on bonds are falling consistently and sometimes even lag behind the rate of inflation, why would anyone be concerned with purchasing them?
- How do I purchase Savings Bonds in myPay and how do I request Bonds held in safekeeping?
- How do bonds work?
