bond

Discipline: Economics

A bond is a financial security issued by a government or a corporation and given to lenders in exchange of cash.

Debtors issue bonds, because the amounts they need to borrow are so large that they need more than one lender to bring the necessary funds together. Bonds carry a fixed annual interest rate that drives the lenders to buy them. This interest rate is indicated on the face of a bond, and is called the coupon rate. The issuer pays the amount that the coupon rate yields in cash. This is usually done semi-annually.

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