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?

More terms

Nominal amount

The face value of a gilt. It represents the amount that will be repaid to the holder at maturity and is also used to calculate the dividend or coupon payment.
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Direct listing

Going public without the traditional IPO. Existing shares, straight onto the exchange, no new money raised.
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Investment Return

The amount of money made or lost from an investment. Usually expressed as a percentage.
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SPAC

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Float

Listing a company on a stock exchange, or the shares that are genuinely up for grabs once it’s there.
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Ponzi Scheme

A form of fraud designed to lure new investors, and pays the earlier backers by using the new investors' money.
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Free Trade

The other free trade. International trade in which countries allow goods to flow across their borders without imposing import or export taxes.
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Compound interest

Understand what compound interest means and how it's calculated
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Beta

Learn what Beta stands for in finance.
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