What is a bond?

Learn what a bond is

When governments and companies want to raise money, they’ll often do so by issuing bonds.
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Bonds are effectively promissory notes. In return for buying bonds, investors will receive the money they put in back, plus interest.
Investors usually buy bonds because they promise a fixed return, in the form of interest, that is supposed to be paid back at one or several preset dates.
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As the interest rate paid on bonds is usually fixed and pre-set, it’s common for bonds to be referred to as ‘fixed-income’ investments. Today, not all bonds have a fixed interest rate. Many are now issued with variable or floating interest rates, which change over time.

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Deep dive: What are bonds and why investors buy them?

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Value stocks

Stocks in companies that aren’t necessarily growing fast, but instead are dependable and stable.
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Stock Exchange

A physical/digital place where stockbrokers and traders can buy and sell securities.
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Yield to maturity (YTM)

What is yield to maturity and why is it useful?
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Maturity date

The date on which a gilt is redeemed and the gilt holder receives the repayment of the nominal amount and final dividend or coupon payment.
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Running yield

The annual interest payment (dividend) divided by the current market price of a bond.
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Dirty price

The total price payable on the purchase of a gilt. It’s calculated as the clean price plus accrued interest.
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Zero-Sum Game

A situation in which one person's gain is another's loss.
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Accrued interest

The interest earned on a gilt since the last dividend date. When buying a gilt, the buyer pays the accrued interest at the time of a transaction to the seller in addition to the clean price of the gilt
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Net Asset Value (NAV)

The value of a company's assets relative to the number of shares it has.
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