Bond
Beginner
What Is a Bond?
How Bonds Work
Issuance and pricing
When a company or government needs to raise funds, they issue bonds. These bonds come with three key details: the face value, the coupon rate, and the maturity date. The face value is the amount you'll get back when the bond matures. The coupon rate is how much interest you'll earn each year, and the maturity date is when they’ll return your original investment. Initially, bonds are sold directly to investors, but they can also be bought and sold later in the secondary market.
Interest payments
As a bondholder, you’ll get regular interest payments, thanks to the coupon rate. For instance, if you have a bond worth $1,000 with a 5% coupon rate, you’ll pocket $50 every year in interest.
Maturity
When your bond hits its maturity date, the issuer pays you back the face value. Bonds can be short-term (under 3 years), medium-term (3-10 years), or long-term (over 10 years), depending on how long you want to wait to cash in.