Finance
What is A bond?
A bond is a loan you give to a government or company in exchange for regular interest payments and the return of your money on a set date. Bonds are generally lower-risk than stocks.
See it, don’t just read it.
Watch a 2-minute lesson with voice + animation that explains a bond.
Key things to understand
- 1You lend money; the issuer pays periodic interest (the 'coupon').
- 2At maturity, the issuer repays the original amount (the 'face value').
- 3Government bonds are typically safer; company bonds pay more but carry more risk.
- 4Bond prices fall when interest rates rise, and vice versa.
Frequently asked questions
- How is a bond different from a stock?
- A bond is a loan that pays interest; a stock is ownership in a company. Bonds are generally lower-risk and lower-return.
- Why do bond prices fall when interest rates rise?
- New bonds pay more, so existing lower-rate bonds become less attractive and their price drops.
- Are bonds safe?
- Government bonds are among the safest investments; corporate bonds vary with the issuer's financial health.