Learning Modules

A bond is an investment product where the investor lends money to the issuer (either a government or a company) for a predetermined period. In return, the issuer agrees to pay the investor a fixed or variable interest rate during the term of the loan and to repay the principal amount when the bond matures.

Bonds are integral to the debt market, serving as a mechanism for various entities to access capital by borrowing from investors. They provide investors with income through regular interest payments, while offering issuers a method to finance projects or operations without diluting ownership.

Key participants include bond issuers (governments, municipalities, corporations), investors (individuals and institutional investors like pension funds and insurance companies), intermediaries (investment banks), credit rating agencies, and regulatory authorities.

The coupon rate is the annual interest rate paid on a bond's face value to the bondholders. It can be fixed or variable, depending on the bond's terms.

The face value, also known as par value, is the amount of money the bondholder receives from the issuer when the bond matures. It's also the basis on which periodic interest payments are calculated.