ELI5: bonds in finance
// explanation
What is a bond?
A bond is like an IOU or a promise to pay back money [3][5]. When a government or company needs money, instead of going to a bank, they can sell bonds to regular people like you—and those people are lending them money [2]. It's like if you lent your friend $10 and they promised to give you back $10 plus 50 cents in interest after a year [2].
Why do people buy bonds?
Bonds are safer than stocks because the government or company promises to pay you back a specific amount of money on a specific date [2]. You get paid interest (extra money) just for letting them borrow from you, kind of like getting a reward for being patient and trusting them [2].
What happens when you own a bond?
You're basically waiting for payday—the bond issuer pays you a fixed interest rate regularly, and then when the bond "matures" (reaches its end date), they give you back all your original money [2].
Who uses bonds?
Governments and big companies use bonds to raise money for big projects like building bridges or expanding their business [3][4]. It's usually for long-term stuff that will take years to pay back [3][4].
// sources
III “Blue Bonds:” Which Projects Are Eligible? Before contemplating financing through a “blue bond,” potential issuers need to identify eligible projects. The ...
When governments or corporations want to borrow money, they can issue bonds, which are securities that usually pay investors a fixed interest rate. Bonds are ...
A bond is a form of loan or IOU. Bonds provide the borrower with external funds to finance long-term investments or, in the case of government bonds, to ...
Bond financing is a type of long-term borrowing that state and local governments frequently use to raise money, primarily for long-lived infrastructure assets.
A bond is a debt security, like an IOU. Borrowers issue bonds to raise money from investors willing to lend them money for a certain amount of time.
Video by Charles Schwab
Video by The Ramsey Show Highlights
Video by Concerning Reality
