A bond is a debt investment. When you buy a bond, you invest by lending money to a corporation, government, or government agency that issues, or sells, the bond. The
issuer
has the use of the money for a specific
term, or period of time, and promises to repay the loan, or
principal, when the bond matures at the end of the term. The issuer also promises to pay interest, figured as a percentage of the
par value, or face value, of the bond for the term.
Bonds are also known as
fixed-income investments
because you earn interest at a specific rate on a regular schedule until the
maturity date. Some investors buy bonds primarily for this income, while other investors trade bonds to realize a profit when they sell.
Corporations, governments, and government agencies issue bonds to the public in order to raise the money they need.
