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

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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Gilt

What is a gilt?
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Professional Client

An investor that is able to meet several regulatory criteria.
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Accounting standards

The rules a company follows when preparing financial statements.
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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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Volatility

A measure of how much the prices of an asset or index vary over time.
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Profit and Loss Statement (P&L)

A statement that summarises firm's expenses, costs, and revenues incurred during a time period. AKA income statement.
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Arithmetic Mean

The sum of a set of numbers added together and then divided by the total amount of numbers in that set.
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Earnings per share

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