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Bond

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

Equity

The amount of money a company would be left with by subtracting its liabilities from the value of its assets.

Arithmetic Mean

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

Dirty price

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

Depository

We look at what is a depository and what role they play in keeping markets work.

Zero coupon bonds

What is a zero coupon bond?

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.

Exchange-Traded Fund (ETF)

A collection of investments, pooled into a single fund that can be bought and sold on a stock exchange.

Base rate

What's the base rate?

Value Investing

The art of buying shares which trade below their value, according to the analysis of the value investor.

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