A bond is a fixed income investment in which an investor loans money to an entity (corporate or governmental) that borrows the funds for a defined period of time at a fixed interest rate.
 | | Term of the Day | Words to Know | | |  | | Bond | | A bond is a fixed income instrument that represents a loan made by an investor to a borrower (typically corporate or governmental). A bond could be thought of as an I.O.U. between the lender and borrower that includes the details of the loan and its payments. Bonds are used by companies, municipalities, states, and sovereign governments to finance projects and operations. Owners of bonds are debtholders, or creditors, of the issuer. Bond details include the end date when the principal of the loan is due to be paid to the bond owner and usually includes the terms for variable or fixed interest payments made by the borrower. | | Read More » | | Fixed-Income Security | | A fixed-income security is an investment that provides a return in the form of fixed periodic interest payments and the eventual return of principal at maturity. | | Read More » | | | IOU | | An IOU is a document acknowledging a debt. IOU is a phonetic version of the words "I owe you." | | Read More » | | | Variable Interest Rate | | A variable interest rate is a rate on a loan or security that fluctuates over time because it is based on an underlying benchmark interest rate or index. | | Read More » | | | Fixed Interest Rate | | A fixed interest rate remains the same for the entire term of the loan, making long-term budgeting easier. Some loans combine fixed and variable rates. | | Read More » | | | | | | CONNECT WITH INVESTOPEDIA | | | | | | | |
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