Bonds are debt securities issued by entities like corporations, governments, and other organizations to raise capital. They promise to repay investors the principal amount plus interest over a specified period.
Key Points:
- Bonds are debt instruments used by entities to raise funds.
- Investors lend money to the issuer in exchange for regular interest payments and the return of the principal amount at maturity.
- Bonds have a face value, representing the amount the issuer will repay at maturity.
- Bond prices fluctuate based on factors like interest rates and issuer creditworthiness.
- Higher-rated bonds and those with longer maturities typically offer higher interest rates.
- Bonds provide a stable income stream and can help diversify investment portfolios.
- They are generally considered less risky than stocks but still carry issuer and market risks.
