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

Earnings per share

We look at what earnings per share mean and how to calculate 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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Yield

Income from an investment as a percentage of its current price.
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Fixed Income

An investment that provides a fixed rate of return, often over a specific set of time.
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Interest Rate

The amount a lender charges for lending your money, or a borrower pays you for borrowing your money.
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Over-The-Counter (OTC)

A security that is sold outside of an exchange.
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Packaged Retail and Insurance-based Investment Product (PRIIP)

An investment where, regardless of its legal form, the amount repayable to the retail investor is subject to fluctuations.
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Maturity value

What's the maturity value of a bond?
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Equity ETF

An exchange-traded fund that is comprised of a set of stocks.
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