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.

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.

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.

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

More terms

Time Value of Money

The concept that money you have now is more valuable than the same sum in the future.
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Fundamentals

The data or information that is likely to impact a company's stock price.
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Zero-Sum Game

A situation in which one person's gain is another's loss.
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Investment Trust

A company that pools money together from multiple investors and then invests it.
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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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Base rate

What's the base rate?
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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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Alpha

The percentage by which an investor outperforms a relevant benchmark.
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Holding Period Return

The amount of money generated by an asset during the time that it was held by an investor..
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