Submitted by nsscadmin on
A bond is essentially a loan you are making to a company or the government. The bond is secured by the company’s assets, or the government’s tax base. You are loaning your money to the company or government with a promise they will pay you back your principal investment with interest upon maturity.
The term on a bond typically ranges from one year to thirty years. Interest on a bond is usually paid at a fixed rated, but there are some bonds that have variable rates that are based on inflation. The rate of most bonds is determined by the current interest rate and the credit rating of the bond issuer. Issuers with poor credit ratings usually have to pay a higher interest, but with it comes a greater risk of default.
